Setting Strategy Input Optimization Ranges
When using the Genetic optimization method (recommended):
The number of tests are automatically determined by TradeStation.
When performing an Exhaustive optimization:
The number of optimization tests is a function of the number of inputs being optimized. Following is a table that you can use as a guideline to determine the number of optimization steps (increments) recommended for each parameter:
| Parameters | Steps Per Parameter | Total Tests |
|
2 |
20 - 40 |
400 - 1600 |
|
3 |
10 -15 |
1000 - 3375 |
|
4 |
7 - 8 |
2401 - 4096 |
|
5 |
5 - 6 |
3125 - 7776 |
|
6 |
4 |
4096 |
For example:
Lets say a trading strategy uses the RSI indicator as well as a moving average to generate signals. This strategy will have the following 4 inputs for you to optimize:
- RSI = RSI lookback period
- MovAvg = Moving Average lookback
- OB = Overbought level
- OS = Oversold level
Typical optimization parameters would be:
| Signal | Start | Stop | Increment | Steps |
| RSI |
5 |
20 |
3 |
6 |
| MovAvg |
2 |
40 |
2 |
20 |
| OB |
60 |
80 |
5 |
5 |
| OS |
20 |
40 |
5 |
5 |
The above optimization ranges would give a total number of 3000 optimizations (6 x 20 x 5 x 5=3000)
IMPORTANT
NOTE - Be careful not to restrict the optimization process too
much using large increments between the search parameters, because that
can result in making it unrealistically difficult for the strategy to
pass the walk-forward analysis test. When using WFO
together with either the TradeStation Exhaustive or Genetic optimization
method, it is recommended that you perform at least 1000 iterations/tests
to make sure that WFO
gets enough data to be able to perform a proper walk-forward analysis.