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Hi,
If your IS time frame is not the same as your OOS time frame (e.g 2 year IS with rolling 6 month OOS) then the values used in the preceding OOS can end up more profitable than the optimized values over the following IS since the IS period is optimized over a different (e.g. longer) data set.
P.S.
I would not trust any walk forward that was only producing 1 or 2 trades IS. While no amount of trades IS can completely predict what will happen OOS, all of your performance calculations (i.e. fitness function) are based on IS statistics, and 1 or 2 trades are simply too few data points to calculate any kind of meaningful statistic.
I would suggest extending your IS time frame to capture more trades such that the statistics have a chance to level out. 30 is the number usually suggested to get a normally distributed sample. Your next OOS period would then be less likely to be based on an IS fluke.
Mike
--- In amibroker@xxxxxxxxxxxxxxx, "brianw468" <wild21@xxx> wrote:
>
> Hi
> I recently tested a trading system but got some strange results from the WF test. The WF process used exhaustive optimization.
> An extract from the results (too large to reproduce in full) is:-
> Item Profit No. Trades
> IS1 533 1
> OOS1 1126 2
>
> IS2 474 1
> OOS2 -537 2
>
> IS3 43 1
> OOS 784 2
>
> In two cases the OOS results are better than the preceding IS results. Though a little surprising,this is quite plausible, because the time periods differ.
> However,the IS2 profit is much poorer than the OOS1 profit, and this is a worry since exhaustive optimization is used, and the time periods are the same. Can anyone offer an explanation? Would it lie in the way profit is handled when a trade is not completed by the end of the selected period?
>
> Thanks
> Brian
>
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