What is Curve Fitting?

The error of over-optimizing a trading strategy to fit historical data so perfectly that it fails in real-time trading.

In-Depth Explanation

A curve-fitted strategy looks "too good to be true" on paper but is useless for predicting future price movements because it has captured "noise" instead of market "signal."

Practical Example

"The trader added 15 filters to their strategy to make the backtest look perfect, resulting in extreme curve fitting."

Related Terms

Overfitting Backtesting Optimization

Master the language of risk

Knowing the terms is just the start. Learning how to apply them is where the edge is found.

Join Drawdown Free