Curve fitting — Trading Glossary

Adjusting a strategy's rules until its backtest looks good — which describes the past data rather than finding anything that will repeat.

With enough adjustments, any strategy can be made profitable on the data it was adjusted on. The defence is to change one thing at a time for a stated reason, and to judge the final version only on out-of-sample data.

Also called: overfitting, curve-fit.

Taught in

We Backtested It: The VP StrategyStrategy Playbook

The volume profile rules from the Reel, coded and tested on 21 months of US30 — why they lost, what we changed, and how we tested without fooling ourselves.

Also covered in that lesson

Out-of-sample testTesting a strategy on data that was never used to design or adjust it — the only kind of backtest result that says anything about the future.

Related terms

Out-of-sample test Sample size