What's Out of Sample Data?

Discussion in 'Data Sets and Feeds' started by Corso482, Feb 16, 2003.

  1. whoops, accidently put it under the "retail firms" forum at first.
     
  2. I've usually seen the reference "out of sample data" used when discussing building or testing trading strategies, especially mechanical ones.

    When you build, test, and/or optimize a mechanical trading strategy you use a set of data. Then it's usually a good idea to test the system again on out of sample data, that not used to initially build the system. This is sometimes called walk-forward testing as well, although you could use previous data or data from another trading vehicle.

    The idea being if the system still performs well on the new data there's a better chance the method/system is more robust and not just curve-fitted to one data set. It's certainly not a guarantee, but if your method fails a walk-forward test chances are it will fail in real-time.

    Hope this helped..