WALK FORWARD ANALYSIS – WHICH PARAMETERS TO USE?
- This topic has 13 replies, 4 voices, and was last updated 7 years ago by
.
-
Gret News Nicolas! I was hoping PRT may be developing Walk Forward.
I am wanting to do it but have not yet, I’m just finding answers to my initial thoughts / questions.
Let’s say one of the parameters is a MA and for each of the 12 x 3 month periods the MA optimised value is different (by just a few bars + or -) e.g. the highest 40 and the lowest 20.
Let’s say the optimised MA value for period 12 gave the worst test results (out all 12 periods) but still above 0.5 / acceptable. Period 7 gave the best test results.
Is the logic for using period 12 MA value to Live Trade … that ‘Live / period 13’ trading conditions are more likely to approximate to period 12 than, say, period 7, when I got the best test results?
If I have got Walk Forward testing ‘wrong in my mind’ and it would take too much of your limited time to explain then just say … read the book! ha
I am on page 1 of ‘The Evaluation and Optimization of Trading Strategies’ by Robert Pardo (the guy who invented Walk Forward testing, so he says!) so I can answer my own question soon (I hope!).
I though it good to get a discussion going on here as Walk Forward seems to be the way forward?
Thank You
GraHal
1 user thanked author for this post.
Browsed many website to find a good example and explanation, here is what I found the most “simple” at strategyquant.com website:
What is Walk-Forward optimization/analysis?
Walk-Forward optimization is generally a special type of backtest that is composed of multiple smaller backtests on optimizaiton periods. These optimization periods are split over the whole backtesting period and are always followed by Out of Sample tests with the optimized parameters.
It is a technique in which you optimize the parameter values on a past segment of market data, then verify the performance of the system by testing it forward in time on data following the optimization segment, and the process can be repeated over subsequent time segments.
How Walk-Forward optimization works
in walk-forward optimization, the data are divided into a configurable number of periods (5 in this example). Each period consists of optimization part and run part.
The program starts with optimization period 1. It will run the simple optimization on optimization period 1 to find the best parameter values. These parameter values are then applied to run period 1 – strategy is trading with the optimized parameters found in previous step.
At the end of run period 1, the system again runs simple optimization on a part of data marked as optimization period 2. It finds the best set of parameter values and they are again used for trading in run period 2.
This continues until the period 5, which is also the end of history data used in test.
Walk-Forward optimization simulates how you could work with the strategy during real trading – you can optimize it on some historical data and then trade it with the optimal values. After some time you’d want to reoptimize it and let it trade again.
What Walk-Forward optimization/analysis tells you?
It basically tells you if the startegy is robust enough and if its performance can be improved by reoptimization.
If strategy performance is worse during reoptimization than the original non-optimized startegy, it is a big signal to watch for curve fitting.On the other side, if Walk-Forward optimized strategy performs better than non-optimized version on the same data, it tells you that :
- Your strategy will benefit from optimization, so you should periodically reoptimize it to get the best performance
- It also means that the startegy is robust enough to cope with market changes (using reoptimization) and there is a big chance it will work also in future.
4 users thanked author for this post.
I woke up this morning with another unanswered question on my mind.
When I have done my initial Walk Forward Analysis and I then set it to Trade Real or Virtual Money … how do I know how often / what period to re-optimise over?
Results for a Walk Forward Matrix are required as illustrated below and more detail here
http://strategyquant.com/articles/walk%20forward%20matrix
Nicolas, if you attend VIP meetings / have an input (?), might you be able to propose to the ‘PRT Techie Elves’ that Walk Forward Matrix (or alternative to get the same result) is included in the future release of the PR Platform with Walk Forward?
Many Thanks
GraHal
1 user thanked author for this post.
Thanks Dowboy. For your information, WFA is currently in development at PRT. I had the chance to participate to the project to give advices and I know it will be a big improvement for the optimization module of probacktest. I hope I’ll get into the beta soon, I’ll give news as soon as possible.
1 user thanked author for this post.
Hi everyone!
I found out that Walk-Forward Analysis was just made available on Demo accounts in PRT… I started to use it (I had been waiting for this for a long time on PRT) and it looks nice. I guess that it should become available on Real accounts as well in a few days.
1 user thanked author for this post.
Find exclusive trading pro-tools on 
