Hi Andi,
Thanks for your response!
I’m afraid I’m still a bit confused, particularly with how Walk Forward behaves in the “Optimization” section of the Reactor, and the “Robustness Testing” section.
Walk Forward optimization
So if a strategy passes the “Walk Forward optimization” stage of the Reactor, it is basically the same strategy that arrived into this section, but “Walk Forward optimization” performed optimization on the strategy, found better parameters, and made a “better” strategy, BUT, the strategy that has passed through “Walk Forward optimization” and has been validated, is actually the ORIGINAL one, which has now been shown to not be over-optimized??
Why would there be any need to then backtest the complete period of data again, if we are keeping the original strategy?
If “Walk Forward optimization” performs optimization on the original strategy , and can only come up with a worse strategy, would the worse strategy pass validation?, or would both strategies be discarded, being that the original one was over-optimized, and the “worse” one was likely to be too, given that the “Walk Forward optimization” is designed to over-optimize?
Additionally, there is the option to be “In Sample” for “Walk Forward optimization”, I would think that we would always want to be “Out Of Sample” for this part of the process, am I wrong?
Walk Forward validation
I’m not sure how this is different to “Walk Forward optimization”, other than it is actually for optimizing strategies on purpose?
You use the Optimization options in this section to optimize – how do we know we are not over-optimizing? How is this testing the robustness of the strategy?
And regarding the final backtest, is this where “Walk Forward validation” tweaks the parameters as it goes through the segments, and the parameter settings that are the result of the final segment being processed are then tested over the whole period of data again? The results of this final backtest deciding whether the strategy is valid or not?
Is the best use of this section to streamline a strategy, and then hope it passes Monte Carlo?
I hope I’ve asked these questions clearly, it’s almost as hard knowing what questions to ask, as it is figuring this out!
Thanks,
Simon