Why Your Trading Strategy Fails in Real Life!

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Stress Test Your Trades to Avoid Overfitting!

Overfitting in backtesting occurs when a trading strategy is excessively tailored to historical data, capturing noise instead of true patterns. This leads to impressive backtest results but poor real-world performance.

Signs of overfitting:

Unrealistic returns: Consistently high returns with minimal drawdowns are suspicious.
Overly complex strategies: Intricate rules and numerous parameters increase the risk of overfitting.
Inconsistent performance: The strategy performs well on the tested data but poorly on similar assets or different time periods.
To avoid overfitting:

Use out-of-sample testing: Divide data into training and testing sets.
Keep strategies simple: Favor simplicity over complexity.
Stress test: Evaluate performance during various market conditions.
By understanding and addressing overfitting, traders can develop more robust and reliable strategies.

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✅ RISK DISCLAIMER
Quantified Strategies (SIA Lofjord) is not an investment advisor. The content and information provided are educational and should not be treated as financial advisory services or investment advice. Trading and investment in securities involve substantial risk of loss and is not recommended for anyone who is not a trained trader or investor – it shall be conducted at your own risk. It is recommended that you never risk more than you are willing to lose. Leverage can lead to substantial losses. Any use of leverage, margin, or shorting is at your discretion. Quantified Strategies (SIA Lofjord) is not responsible for any losses that occur as a result of its content and information.
Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, Since the trades have not been executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs, in general, are also subject to the fact that they are designed with the benefit of hindsight. No representations are made that any account will or is likely to achieve profit or losses similar to those sh