Hi Rick
lol and thanks, yes maybe a book who knows, but I would have to make good money trading first otherwise it would be all just theory (as a lot of my comments to date must be, since I haven't made a lot of money yet). But to be honest, your book might be a better seller - I think yours is almost written since it'd basically be a collection of your posts!
In terms of curve-fitting I was making a generalistion, but to the extent that the mre variables you include in the optimisation, the more you are likely to be curve-fitting and in that sense I think going from 1 to 2 variabes is not a big step but going from 2 to 3 is because of how many extra degrees of freedom that 1 extra variable introduces - with 1 variables you can have 2 outcomes, with 2 variables 4 outcomes but with 3 variabes 8 outcomes and so on.
More important than the number of variables, imo, is how real-world they are, or the values you use. To explain, take for example the ADR. If the ADR for a market is 50 pips +/- 20 pips over a 10 year period, it would make sense to allow an ADR variable in your optimisation to range betwen 30 & 70. But if you use a range of 10 to 90 for example then there might be a whole set of optimisation outcomes that look really good on the backtester, but will probably never in the real world.
In response to your comment, I did a quick scan on the web for optimisation / curve-fitting articles related to trading, and there are a few good ones. One that I liked because it explains the difference and the risks in very simple terms (and using a couple of really good examples) is at the following link:
https://algotrading101.com/blog/15001/what-is-curve-fitting-overfitting-in-trading-optimization
I have included an image from that link below to illustrate the key point, but I'd encourage reading the article:
To your last question, yes at this stage I am sticking to FX markets. There is plenty to choose from there with all the combinations of the 6 majors plus the NZD for me to build my portfolio for the next year or so before thinking about diversification to indices, metals, energies, etc.
Cheers, Sharks
