Optimization

Optimization - The process of adjusting a strategy’s parameters to improve performance. In practice, optimization involves running many backtests over combinations of inputs (e.g. indicator lengths, stop-loss values) to find the best settings (maximizing profit or Sharpe ratio). Most strategy testers (MetaTrader 5’s tester, cTrader’s optimizer) support an optimization mode that iterates over parameter grids. However, excessive optimization can lead to curve-fitting (overfitting) to historical data.