Walk-forward Testing

Walk-forward testing is an essential tool for creating robust trading systems. What makes walk-forward testing different from other optimization methods is the unique multi-step approach to strategy testing. The idea behind walk-forward testing is illustrated below:

How does walk-forward testing work?

Walk-forward testing combines optimization and backtesting. During the testing, optimal inputs are tested against real market conditions to see how they would perform.

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Preventing curve-fitting
First, the entire data series is broken up into smaller parts. A series of tests is done, and each test is done on a small portion of the whole data series (in-sample data). When optimal input values are found for that small portion, the software checks how they would have performed in the real world by applying them to data that was not part of the test (out-of-sample data). The tests continue to repeat until you have tested the entire data range. In the end, you are shown the results that performed the best under varying market conditions. This helps prevent over-optimization, also known as ‘curve-fitting’.

Different options to suit your needs

Walk-forward testing can be used with both exhaustive and genetic optimization methods. You can specify different sizes for your in-sample and out-of-sample data, and you can even display information in bars or days.

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No jumping forward
There is also a modification to the walk-forward process, called the anchored mode. When you select the anchored mode, the in-sample data stays anchored to the beginning and gets longer for each test, instead of jumping forward. This is another way of making sure your results are robust.

Export to Excel with one click
The walk-forward testing report can be exported to Excel with just one click. Then you can perform additional analysis on the data you found during the test.

Export to Excel with one click

The walk-forward testing report can be exported to Excel with just one click. Then you can perform additional analysis on the data you found during the test.

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Risk Warning:
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.