Is Walk Forward Tested System Is Better than the Best Optimized One?
It looks like the history of technical analysis has been largely influenced by optimization. That is, we studied the past, found something that looked significant, then optimized rules and procedures to trade the observation in the future. Sometimes that has worked. Often it has not. That’s our dilemma. What are we to do? In the past, we answered these questions by doing more optimization, more curve fitting. Indeed, we treated historical data like prisoners of war. Our thesis was, if you beat them often enough they would reveal anything. Which is true, but you want them to reveal everything, not anything. This brings me to one point. I think we will all make much more headway with system development by spending less time on optimization and more time on walking systems and procedures forward. If on a walk forward test, the system holds up, we probably have something. And for sure, what we have will be better than the very best optimized system when it comes to real time trading. Hence
