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Trading Strategies

What Is Curve Fitting

Curve fitting is reading a rule off the accidents of one stretch of bars, so that it fits that stretch exactly and nothing after it. This paper shows you gold's up-days by weekday in 2024 and 2025 from real bars, where the best and worst weekdays swapped places; the idea as a jacket pinned to one mannequin; January 2025's Thursdays on the chart, the month the fitted rule still seemed to hold; the quietest length of an average moving year to year; and the Forward setting of the Strategy Tester, which holds back half the bars, on your platform.

Difficulty
Advanced
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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A rule read off one year

Curve fitting is reading a rule off the accidents of one stretch of bars. Take gold's days that closed above their open, counted by weekday. In 2024 Thursday was the best weekday, 33 of 52, and Wednesday the worst, 22 of 51. Read a rule off that — Thursdays rise, Wednesdays do not — and in 2025 the two swapped places: Wednesday 33 of 52, Thursday 23 of 51. The rule fitted 2024 exactly, because it was cut from 2024, and nothing about Thursdays was ever in it. The next stretch of bars has its own accidents, and a rule cut from the last ones cannot know them.

A jacket pinned to one mannequin

Picture a jacket pinned to a tailor's mannequin. Pin it at enough points and it fits that shape perfectly, and only that shape; put it on the next mannequin and every pin is in the wrong place. A rule with many settings is a jacket with many pins — an average's length, a band, a weekday, an hour — each pinned to the stretch of bars it was tuned on. The more pins, the better the fit to those bars and the worse the fit to the next ones. The fit is not the strategy. The strategy is whatever still fits the next mannequin, and only the next mannequin can say.

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