Algo Trading School

Overfitting (curve fitting)

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Every dataset contains patterns that happened by chance. If you adjust a strategy's parameters until the historical results look ideal, you inevitably absorb some of that noise — and noise does not repeat. The result is a strategy that looks brilliant in the backtest and mediocre or worse live.

Symptoms include: many finely-tuned parameters, performance that collapses when a parameter moves slightly, and results that differ wildly between adjacent time periods. Robust strategies tend to keep working across a range of settings.

Covered in depth in Lesson 04: Backtesting sin engañarte.

Related terms

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Lecciones ocasionales y en lenguaje claro sobre trading automatizado — el mismo tono que todo en este sitio. Sin señales, sin promesas; date de baja cuando quieras.

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