AdvancedMAD Academy0:46Quant

Testing on Data You Have Not Seen

Walk-forward optimization repeatedly fits on one period and tests on the next, which is the closest a backtest gets to honest.

0:46 · 6 scenes

This lesson is part of a MAD Academy plan.

What the Lesson Covers

  1. 0:00The only honest test is on data you had not looked at when you designed it.
  2. 0:05The procedure. Fit on a window, test on the next, then roll both forward and repeat.
  3. 0:15Why it is better. Every result is out of sample, and it shows whether the parameters keep changing.
  4. 0:24The signal to watch. If the optimal parameters move wildly between windows, there is no stable edge.
  5. 0:33The remaining limit. You still chose the method after seeing the market. Nothing removes that entirely.
  6. 0:41Walk it forward, watch the parameter stability, then trade it small.
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Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Testing on Data You Have Not Seen — MAD Academy Training Video · MadStockAlerts