How to optimize a trading system without curve-fitting it

There’s a fine line between “optimizing” and “curve-fitting”.
You have to make sure that your don’t over-optimize.

In the following example I’ll show you how to determined the “best” parameter without curve-fitting a system.

The underlying system is a simple breakout system. The system contains a parameter called TF_Param.

In the following I will explain how we optimized the parameter and why we selected 0.7 as the current value for the parameter.

First I run the optimization and look at the net profit, since that’s one of the most important figures.

As you can see, any parameter between 0.35 and 0.8 produces robust results.

Next I am looking at the max drawdown.

Any parameter above 0.4 produces a rather low drawdown, so using the combined information I would pick a TF_Param between 0.4 and 0.8.

Now I am looking at the average profit per trade:

The parameter range between 0.45 and1.2 looks promising, so I am limiting the TF_param to 0.45-0.8.

Now I am looking at the winning percentage. The higher, the better:

Anything above 0.5 produces a quite robust winning percentage above 50%.
As it seems, anything above 0.6 is quite good.
Combining all the previous results we should look for a TF_Param between 0.6 and 0.8

As a last test we look at the number of trades. Again: The higher, the better:

No surprises here: The lower the parameter, the more trades we get.

By combining all the above findings we see that a TF_Param between 0.6 and 0.8 produces best results.
That’s why 0.7 is definitely a good choice. Even if the market changes slightly, the system would still produce excellent results.