BuildAlpha

Curve-fitting is almost certain death for a trading or investment strategy. So, what is Curve-fitting? Well, you know when you test a trading or investment hypothesis, fall in love with the historical results, and then the idea fails to generate similar (or even positive) returns once you decide to trade it live? Most of the pitfalls of system trading and trading, in general, can be avoided or mitigated following these three simple techniques or rules of thumb. 1.  Use out of sample data! Out of sample data is simply withholding some of the data in your “test” period for further evaluation. For example, you have ten years of historical data and opt to put the last 30% in your back pocket. You develop a great trading strategy on the first seven years of the data set and then whip out your “out of sample” data (remaining 30% from your back pocket) and validate your findings. If the strategy fails to produce similar results in the out of sample data then you can be almost ce...

People who want to learn how to become successful traders require expending a few minutes online before reading phrases such as plan the trade, trade what you have planned, etc. For newbie traders, this information can appear more like a disruption than any actionable recommendation. Actually, people who are new in the trading field just desire to know how to set up their charts so they can make money. There is trading software in the market like  Build Alpha , which can make life easier, but using it can make you a trading strategy. However, the new traders also need to learn the rules in order to get success in trading. Each and every norm of trading is crucial. Here are a few trading rules that you need to learn. Let’s have a look: 1. Use a Trading Plan: A trading plan (or system) is a set of rules that stipulates a trader’s entry, exit and wealth management criteria. Using a trading plan lets traders do this, although it is a time-consuming endeavor. These days, it i...