6.3) Real Example: How Over-Fitting occurs when Increasing Degrees of Freedom

Following on from the previous video where a best-practice optimization was performed, our attention now turns to the disastrous effects of over-fitting when the degrees of freedom (number of parameters being optimized) is increased.

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This proves how a profitable system with a real edge in live trading, can be completely destroyed by attempting to optimize too many parameters. A classic illustration of over-fitting.

For viewing the whole series in one place, visit    • Algorithmic Backtesting & Optimization for...  

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