7.3) Determining Walk Forward vs Optimization length, using Statistical Significance

This video explains the importance of designing the backtesting process in order to balance and obtain good statistical significance in both walk forward and optimization phases. It is critical to get the balance right between the duration of the walk forward phase, and the duration of the optimization phase.

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The implications of good (or bad) statistical significance are different for the out-of-sample walk forward phase compared to the in-sample optimization phase. If either phase has poor statistical significance, the effect will be extremely damaging to the back-testing process, and the success of the trading system.

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