TradeStation Walk-Forward Optimizer
The TradeStation Walk-Forward Optimizer (WFO) is an advanced strategy optimization tool that automates the complex, multi-step task of carrying out the statistical walk-forward testing of a trading strategy's optimized inputs.
Starting where other optimizing methods typically end, the TradeStation Walk-Forward Optimizer performs a set of 'walk-forward' performance tests using the optimized (in-sample) performance data against the un-optimized (out-of-sample) portion of the data, in order to simulate the unpredictability of trading a strategy in real market conditions.
The TradeStation Walk-Forward Optimizer is the ultimate strategy trading
stress testing tool combining the power of TradeStation's strategy backtesting
engine, EasyLanguage, and advanced backtesting performance reporting.
Cluster Analysis - Shows a cluster matrix representing the results of each incremental test of Out-Of-Sample% (OSS%) and walk-forward runs for a selected Display category and WFA Type.
Optimization Summary (In-Sample) - Shows a summary of the in-sample results for a set of walk-forward runs. For cluster analysis results, the Run number correlates with the Runs column in the Cluster Analysis matrix for the selected cell and the inputs reflect the specific input combination tested for a given Run.
Walk-Forward Summary (Out-Of-Sample) - Shows a summary of the out-of-sample results for a set of walk-forward runs. For cluster analysis results, the Run number correlates with the Runs column in the Cluster Analysis matrix for the selected cell and the inputs reflect the specific input combination tested for a given Run.
Test Results - Displays the Test Criteria Result score and commentary for a set of walk-forward runs. For cluster analysis results, the OOS% and WFRuns value at the top of the tab represents a selected cell in the Cluster Analysis matrix.
Graphs - Plots a graph of results for a set of walk-forward runs based on the specified equity factor.
P/L History - Shows the P/L for all of the trades considered as part of a set of walk-forward runs. For cluster analysis, the OOS% and WFRuns value at the top of the tab represents a selected cell in the Cluster Analysis matrix.
Performance Summary - Shows a summary of the performance for a set of walk-forward runs. For cluster analysis, the OOS% and WFRuns value at the top of the tab represents a selected cell in the Cluster Analysis matrix.
Sensitivity Analysis - For a Single Walk-Forward Analysis, lets you study how an individual optimization parameter impacts the performance of your strategy.
Distribution Analysis - Allows you to evaluate the trades that make up a strategy by graphing various performance criteria against selected market criteria.
WFO can turn a complex task like a walk-forward analysis into an exciting adventure.
To perform a proper walk-forward analysis a user simply needs to do the following steps:
Because the computational intensive walk-forward analysis is performed by the integrated TradeStation WFO, it is much faster than if it was to be performed in EasyLanguage or an external spreadsheet.
Using the default settings, a trading strategy passes a walk-forward
analysis if it:
If the strategy fails any of the individual performance criteria tests, the strategy is failed overall and may not be suitable for real-time implementation and trading.
To accommodate individual preferences in performance evaluation, the WFO allows users to set the pass/fail percentages themselves (using Setup > Test Criteria Settings).
With rolling walk-forward optimization, the in-sample window (e.g. 2 years) is shifted forward to encapsulate the most recent out-of-sample period (e.g. 6 months). The new shifted two year window is then re-optimized. When the top model is found for this window, it is again tested on the next 6-month test window. This process is repeated until all walk-forward tests are completed.
With anchored walk-forward optimization, the beginning of the in-sample window is fixed at the initial/original starting point.
A Walk-Forward Analysis (WFA) is the most realistic simulation of the way a trading strategy is used in real time. It also helps to answer the following important questions:
Answering the above questions provides the following benefits:
During the WFA, the DetailAnalysis grid will gather the results for each individual run performed. This detail can be used to audit the walk-forward process or to look in detail at the behavior of a strategy during certain periods. A filter can also be enforced on the walk-forward detail, e.g. you may select to display in/out-of-sample detail only for those runs where %Profitable>=40 and Profit factor>=1.5
For both the in-sample and out-of-sample data, the Detail report includes all the statistics that are available in the TradeStation Strategy Optimization Report.
While a single WFA may give a preliminary indication of whether a strategy is robust, a Cluster Analysis of multiple walk-forward analyses is generally a better method for proving or disproving the validity of a trading strategy and optimization procedure.