Hi,
Just wondered what your thoughts were on walk forward optimization as a way to test the robustness of a system?
I have done conventional walk-forwards, so for example build a systems based on 4 years of data (sample of around 350 trades) and then test that system on the most recent two years of data. I have systems that work on this basis which is a good sign you have robustness in your strategy. However if I try a walk forward optimization (so for example optimize every 30 days then restest 10 days out of sample) over the same period it destroys the backtest.
Part of me thinks this means the system is not robust, the last 6 weeks or so of optimized settings should have some predictive value on the next 2 weeks.
However, the same system is profitable on a basic 4 year in-sample versus 2 year out of sample test with no parameter changes. Which is a positive sign.
I find it very hard to get any walk forward optimization backtests to produce profitable systems. I don't want to cheat myself by trading non robust systems but at the same time don't want to set an unrealistic bar whereby I throw out good systems.
What are your thoughts?
Many thanks
Tom
