Optimization Process / Optimization File

 

Advanced Trading Systems, such as TradeStation, provide a feature known as “optimization”. 

 

In general, Trading Strategies are used to determine when to buy or sell.  These strategies are comprised of rules, formulas, and parameters.  Many of these parameters have input values that modify their actions.  For example, MA(2) represents a 2-day Moving Average, MA(8) would be an 8-day moving average. 

 

The optimization feature is designed to simulate and test multiple trading strategies by varying these parameter input values over a selected range and in an incremental stepwise fashion.   For example, MA(3,12,3) would create multiple versions of the basic trading strategy by using: a Moving Average of 3-days, then another strategy using a Moving Average of 6 days, and then another of  9 days, and finally a 12 day Moving Average.  As you can imagine, when a strategy contains multiple parameters with multiple input values, a large array of Trading Strategy permutations develops.

 

The optimization process applies ALL of these different trading strategy permutations to the selected commodity price data of interest.   All of the trades generated (and the strategy / parameter settings that created them) are collected in the resulting Optimization File. 

 

It is this file of trade information that is the input into the Brute Analytics VIEW360 Walk Forward Analyzer.