Creating Robust Strategies (Advanced Backtesting)

Finding strategies that keep performing when you take them live.

Many people use the following approach:

1. Come up with strategy

2. Backtest

3. Forward test if the backtest is good

4. Take Strategy live if the forward test aligns with the backtest

While this approach does work it leaves room for improvement.

We want to stress test the strategy under different scenarios and make sure the strategy parameters are robust.
This allows us to shorten the forward testing period and take the strategy live more quickly (We care about making money after all).

---

Table of Content

1. Baseline Strategy

2. Stress Testing

3. Parameter Robustness

4. Parameter Reduction

5. Walk Forward Analysis

6. Robustness against Fees

7. Robustness against Execution Time

8. Diversification inside the Strategy

9. Final Remarks