// TRADING TERMINOLOGY
What is Overfitting?
A modeling error where a trading algorithm is so complex that it "memorizes" historical data rather than learning underlying patterns.
In-Depth Explanation
Overfitting is a common trap in quantitative trading and machine learning. Overfit models typically have excellent backtest results but fail immediately when exposed to new data.
Practical Example
"The neural network was overfitted to the 2021 bull market and failed to handle the 2022 volatility."
Related Terms
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