052: Ernie Chan – How Quant Strategies Are Created, Scrutinized and Introduced to the Market
Chat With Traders
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The Major Pitfalls of Back Testing
Traders can experience data snooping bias when back testing. The cure for that is typically to make sure the model is simple enough and it's actually sensible not just putting it's good result. A high sharp ratio back test enables us to find out if a strategy is overfitted very quickly in live trading. If you have a strategy that has an astronomical sharp ratio 10 let's say practically every day, it would be profitable if you have a sharp ratio of 10 or less. That's pretty much guaranteed that every week you repoverable and practically every day in the problem so if you run the strategy live for just a one month you can immediately tell whether your back test is
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