How overfitting happens
Every EA has tunable parameters. Optimising all of them simultaneously across a long backtest produces parameters that fit the idiosyncratic features of that specific historical data, not underlying market dynamics.
Warning signs in EA marketing
- Win rate above 90% on a 5+ year backtest with no live track record
- Strategy parameters that look suspiciously precise (e.g., EMA period 37, stop 23.7 pips)
- No walk-forward or out-of-sample performance shown
- Backtest window less than 3 years
- Sharpe ratio above 3.0 without explanation
Partial remedies
Use fewer, more interpretable parameters; require walk-forward analysis before publication; test across multiple instruments beyond the optimised pair.