Curve fitting smells: a quick checklist
Posted: Fri Oct 30, 2026 5:47 am
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?
- 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?