Reviewed by Jan 05, 2021| Updated on
Optimisation, the process of making a trading system more effective, is carried out by adjusting the variables used for technical analysis.
The optimisation involves systems to continually adapt to hit a moving target in order to work. The optimisation is an on-going process, from adjusting the number of periods used in moving averages to simply eliminating what doesn't work.
Trading systems take a long time to build. There is a phase of beta testing once they have been generated and, then, refinement based on those tests. Once the system is implemented, aspects of the real world will come into play and can illustrate problems that were not identified before. The optimisation does not only happen when there are problems.
Systems may change to be optimised based on changing market conditions or also based on recent technological advances. It is crucial to any system's performance to find the best possible combination of settings and variables for the system parameters.
In addition, a system will continue to re-optimise regularly to function correctly based on current data and factors of the real world. As with most stuff, even an engineered device still has the potential to fail. Therefore, a program can become over-optimised.
Consider that it may have sample sizes or time length that are either too small to be reliable or too large to provide fine-tuned data. Also, each factor or rule that is applied to the system can take away from the system's ability to provide accurate information.