Real Reason Most Strategies Fail–“Overfitting” Explained Simply!Hello Traders!
Have you ever seen a strategy work amazingly on historical charts, but fail badly in live markets? You’re not alone. One of the biggest reasons this happens is due to something called Overfitting . Today, let’s understand this concept in the simplest way — so you can avoid falling into this trap and build smarter strategies.
What is Overfitting in Trading?
Overfitting means your strategy is too perfect for past data:
It works great on old charts, but only because it was made to match that exact data.
It fails in real-time because the market changes:
The strategy doesn’t adapt well to new price behavior — it’s not flexible.
Example:
A strategy with 10 indicators giving perfect backtest results may be too specific and only fits that period — not future ones.
Signs Your Strategy Might Be Overfitted
Too many rules or filters:
If your strategy has too many conditions just to improve past results, that’s a red flag.
Works only on one stock or timeframe:
A good strategy should work on different stocks and market conditions.
Great backtest, bad live performance:
If your real trades don’t match the backtest, it might be too customized to the past.
How to Avoid Overfitting in Trading
Keep it simple:
Use fewer indicators and rules. Focus on clean price action and proven setups.
Test on different stocks/timeframes:
See if your setup works across Nifty, Bank Nifty, stocks, or different timeframes.
Use forward testing:
Try the strategy on live charts (paper trade) before putting real money into it.
Rahul’s Tip
A perfect backtest doesn’t mean a perfect future. Build your strategy to be reliable — not just impressive on history.
Conclusion
Overfitting is like memorizing old exam answers and failing the new paper. Don’t build strategies that only look good on past data. Make them strong, simple, and adaptable to real market conditions.
Have you faced this issue before? Let’s discuss in the comments and help each other improve!
Simpletrading
Did you see this too? The simplicity of identifying tapering!This is the most basic I could do to show you all how simple it can be to identify good trade opportunities. It all starts with building the story and from there... well you've got the keys to the kingdom!
For those who don't like that I'm doing this after the fact - please see all of my other videos which identify these trade opportunities (like this one) before they happen.
Hope this was helpful!
Happy Trading :)
Simple Technical AnalysisIt seems like we are over complicating this, pretty much we are remaining in a downtrend until we can break out of the resistance line
this is simply my opinion and is in no way financial advice so please do your own research and don't get trapped in fake outs!
Drop a follow and a boost for simple TA on the regular
Simple Trading - H4 AUDUSD Price ActionIn the FX:AUDUSD 4 hourly chart, AUDUSD has now shrugged off the range between 0.62 to 0.635 and move higher.
The 2 legged up move encountered resistance at recent high of 0.6528.
With the price now back to right above the 50 H4 EMA, my inclination is to go long if the price can be supported by the EMA as well as the bottom price channel.
us30 sell simple analysis as of today us30 was in a little bit of a range on the lower time frames but it is on a strong support order block so in not expecting to break before completing its cycle back to previous strong resistance then i would be looking to sell to my closest order block which is where big exchanges are in the market
Is bitcoin preparing for new low..!!As we can see bitcoin is forming Inverted flag and pole pattern, so if it goes below 34455 level then a short position can be taken. Sl should be according to your risk capacity. first target could be around the support zone i.e arround 28000-30000 level. If that support zone is broken a good sell off may come in near future.
Similarities between Bitcoin's rising channels (950% gains?!?!?)This idea is not fancy. It is simple textbook chart formations such as flagpole targets and rising channels. Many people's first indicators that they learn are the MACD and the RSI. Next comes the use of divergences with the indicators and oscillators. This chart is basic enough to be in the introductory section of a trading textbook.
While it is undeniable that we have higher highs and higher lows the chart below shows that that compared to last time the higher high was not as high, comparing almost 20% in the 2020 higher high to only 6.3% in the 2021 higher high. What is nice for the bulls is that the higher low we have put in so far in 2022 is 18.8% higher then the comparison low in the channel while in 2020 it was only 11.25ish%. So the high is not relatively higher but the low is relatively lower.
Hopefully some wonk in the comments can tell us which performs better, is it better to have higher highs, or is it better to have higher lows?
Regardless, the targeting and stop loss/trade management is pretty simple. For full performance just see the chart below. It does not get much easier than that. My linked idea about the XABCD butterfly will show a higher up target but that may take a while to reach. We already had a year of sideways and if we hit target with over a 9x who wants to be greedy and hold open a position for perhaps another year?
The black flagpole target helped define a significant area for over a year and a half. I assume that if the $440,000 gets met that will likewise be a significant area for a long time. I, however, won't be in the game as I like my XABCD butterfly target of $375k much better.
I, also personally, am not going to be doing a whole lot with btc as a trade, but I will be using it to determine where I think the market may stall and reverse. I have my positions and trades on in my preferred alts.
USD/CAD LONGS On the Daily TF we've been having a series of higher highs and higher lows, It looks to be that cad can have a further push to the upside all the way to me desired target of 1.27750. Should we remain above where price currently stands at 1.26600 in the daily perspective we can see cad rise above to my target soon.
Medtronic & its 100smaThe chart speaks for itself. 100sma has been held and tested multiple times.
RSI has not gone below 35 RSI.
Giving it a little wiggle room makes sense to avoid getting stopped out. The ATR (average true range) is 2 points. So a stop below $127 could potentially provide enough room.
price at important levelWe take a look at a simple analysisNZDCHF of price is trending in a descending channel and has reached the bottom of the channel. we would be looking for a bullish reversals with a buy to the upper line of the descending channel, but if price breaks support on the other hand we would be entering sells on retest and rejection of price to previous support levels OANDA:NZDCHF
BEST OF LUCK
LIKE SUPPORT ND COMMENT THANK YOU
Nice Short From Resistance LevelA simple trade;
Met with daily resistance from the channel's resistance line. The candlesticks are being more than generous this time by showing their act.
A good short, increase the stop loss a little more if you want to be more conservative, avoid any RR below 5.
Don't go for the take profit near the support channel line because the price can bounce back to a supply zone from the white rectangle as the demand is strong there.
Avoid risking more than 0.5% on the trade, apply a good risk management rule.
I will try my best to increase our capital by 10% per week.
Let's see how it goes.
GBP/JPY Short Trap Sell op 4Hr Timeframe
Wait for price to break 145. with a lot of momentum and get in at the top around the 145.500 area.
This should be a fake out and looks like an op to catch the ride down on the trapped traders.
However price is in a strong uptrend and it actually could break 145 and keep going up.
In this case I will look to get in on the second retest of the 145. Key Lvl.
Going to have to let the market come to us on this one.
Will update.