Strategy optimisation: how many parameters is too many?
Optimisation finds the settings that worked best — and that's the problem. Every added parameter adds degrees of freedom, and past perfection is future failure.
What's your rule?
- how you limit parameters and ranges
- the robustness checks you run after optimisation
- the over-optimised result you believed once
The expectancy guide explains why fitted results mislead.
Background: Risk-reward ratio, win rate and expectancy: the maths behind a trading edge
A high win rate can still lose money. See how win rate and risk-reward combine into expectancy, with break-even win rates and worked examples.
What is a good risk-reward ratio in forex?
There isn't one right ratio. What matters is expectancy, the win rate and ratio together. A 1:2 ratio breaks even at about 33% winners before costs, while a 1:1 ratio needs 50%.
How do you calculate trading expectancy?
Multiply the win rate by the average win and subtract the loss rate multiplied by the average loss. Measuring wins and losses in multiples of the amount risked (R) makes the result easy to compare.
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