Curve fitting smells: a quick checklist

[Shadow Trader]

Some things should raise suspicion immediately when reviewing a backtest or a shiny system someone else is selling.

- A perfectly smooth equity curve with almost no drawdown.

- A huge number of rules, filters and exceptions.

- Results only on one pair and one timeframe.

- Stellar performance in a specific year and mediocre elsewhere.

- Optimised values that look oddly precise.

- No mention of costs, or costs set unrealistically low.

- A short test period with a small number of trades.

None of these proves a problem alone, but several together are a strong warning.

A useful rule is to ask what the strategy is exploiting. If the answer is vague, such as "the market tends to go up after this pattern", digging deeper usually exposes a weak foundation. A believable edge has a story: a forced flow, a behavioural bias, a structural feature.

Which of these warning signs showed up in the last system tested or purchased?