How Do You Actually Know When You've Overfit Your Trading Algorithm?
How Do You Actually Know When You’ve Overfit Your Trading Algorithm? TL;DR Overfitting is the silent killer of algorithmic trading strategies — your backtest looks incredible, then live trading falls apart. A recent discussion in the r/algotrading community (60+ comments, actively debated) digs into the practical question every algo trader eventually faces: how do you actually detect overfitting before it costs you real money? The consensus is that there’s no single magic test, but there are reliable warning signs and methodologies that experienced traders use. This article breaks down the community’s collective wisdom on catching overfit before it wrecks your P&L. ...