Id like to add my 2 cents on that matter as well if i can.
Ive experience the same as Grahal, V1 outperforming V2++ in the long run, and this is because of overfitting
Its easy to think that “oh i only have 2 conditions for my entry, if i add 3 more filters i can tune this baby to the max!”
Problem is that when you start adding, you start curvefitting (more then u already have)
I believe that the best thing to do is have multiple OK looking systems. Winning every trade is hard. Exiting on peaks without giving anything back to the market is gonna be hard.
Trying to just get average, good trade tho, is a lot easier. Do this *10 and suddenly u should/might have a diversified portfolio of strategies. Some win in month A, some loose in month A, on the average, if u make more money than you loose, then ur good2go.
Usually when you keep adding filters, you “remove the average” of the system if that makes sense. Your trying to optimize it so it gets better and better. When what you really should have done is just sticking with the “average good looking” system, because it will take more trades (less filters maybe) and in the future price data, who knows if that “new filter” you just added is going to filter out the next 10 profitable trades.
More trades = more robust backtest in my opinion. Adding filters that remove trades COULD remove your future profits as well.
And of course theres this beautiful balance of bullshit in this game. A filter can remove 100 bad trades in backtest, but at the same time remove 100 profitable future trades. Just try to think about the filters you add: what is it actually doing? Is it removing a day of the week? Why? If the majority of Fridays are bad in backtets, whos to say that fridays wont be ur best day going forward.
Lets say ur trading a breakout strategy: a filter like “Daily close > average 200MA” might be a better filter because when daily price is below, thats when we see the majority of volatile and choppy markets (dosnt mean thats true for future prices tho!)
So i would say, the hardest part is just getting those average systems. It takes so much time to create and fail.
Then when u have a few, the next phase of problems occur: trying to stick with the program.
I have systems that have weeks, months and some even a year or 2 in backtest where the system has just lost money all year long. (loosing small tho) and sticking true with those strategies are hard. but if you have multiple strategies and your equity in total goes up, then it could and should be a lot easier for u.
Use ur head when adding filters, and try not to remove many trades from ur backtest if possible. hope this helps
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