Can your system do the walk?

摘要

There are two reasons why a successful trading system does not maintain high performance. One, the system is not based on a valid premise. And two, the developer did not follow sound testing procedures. Thanks to new technologies/ the second requirement is easier to accomplish.rnThere are many ways to build a bad trading system, but two of the more common are the lack of a valid premise and the selection of non-robust parameters. To overcome these issues, developers often split their data into two sets: the development, or in-sample, set and the test, or out-of-sample, set. A common split is using 80% of the data for development and 20% for validation.