Interpreting Walk Forward Results

It's important that you understand the full capabilities of Walk Forward Pro. This guide provides a quick-start to interpreting the walk forward results screen

Overview

As you already know, a WFO (Walk Forward Optimization) consists of multiple stages. This section explains how the information from each stage relates to the data shown in the application’s user interface.

Step through the Walk Forward Analysis Process

Let’s take it step-by-step. During Stage 1, all of the parameter combinations for the trading system that were requested by the user on the ‘WFA Setup’ screen are tested. The parameter combination that is considered to be the most robust from the optimization phase, is then used in the first out-of-sample walk forward test. The parameters that were chosen can clearly be seen in the first row of the table on the ‘Out-of-Sample Walk Forward Tests’ screen as shown below. Note that the rules used to select the parameters to use in the walk forward phase will depend on the settings selected for the ‘Selection Performance Metric’ and the ‘Selection Basis’ on the ‘WFA Setup’ tab.

The results from this first out-of-sample walk forward test (using the most robust parameters) can be seen in the first row of the table on the ‘Out-of-Sample Walk Forward Tests’ screen, and the equity curve can be seen as the first section of the chart, as shown below.

Progressing to stage 2 of the Walk Forward Analysis Process

Following completion of the walk forward test, Walk Forward Pro automatically moves onto Stage 2. In line with best practice, the optimization phase of Stage 2 moves forward so that the end of the optimization period is the same as the end of the previous walk forward test period.

All combinations of the parameters requested by the user are once again tested during this second optimization phase.

Once the optimization has completed, the most robust parameter combination from optimization 2 is then used as the parameters for the next out-of-sample walk forward test.

This illustrates one of the major benefits of using the WFO process:

The parameters that were chosen from Optimization 2 can be seen highlighted above. In this case they were the same as those chosen in Stage 1, but this will not always be the case.

The performance of the chosen parameters against the out-of-sample data can be seen in the second row of the table and in the second section of the equity chart as shown below.

Completion if the entire Walk Forward Analysis Process

The WFO process continues until all of the stages that were requested have completed. The chart now represents the full cumulative out-of-sample results.

Pre-live Optimization

If the user requested a ‘Pre-Live Optimization’ to be run from the ‘WFA Setup’ tab, this will now automatically start. Pre-Live Optimizations are used to identify what the best performing parameters are in the period of time immediately prior to the end of the overall test period. This makes these parameters ideal for live trading since they are based on the most recent dynamics in the market. These parameters can be seen on the ‘Pre-Live Optimization’ screen as shown below.