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Detecting Overfitting in Strategies

HardMachine Learning00:00
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Your question is Detecting Overfitting in Strategies. Take a moment with it on the right.

Talk me through your thinking if you like. When you're confident, submit your answer and I'll grade it like a real screen (7/10 or better passes).

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Problem

How do you determine if a trading strategy is overfitting to historical data?

Discuss a practical, production-quality process rather than defining overfitting. Your answer should address time-ordered validation, transaction costs, parameter stability, multiple testing, regime changes, and the difference between in-sample and out-of-sample performance. Explain which diagnostics and evaluation metrics you would use, how you would avoid look-ahead and survivorship bias, and what evidence would make you reject or deploy the strategy.