196: “How to avoid curve fitting using independent testing” – Jeff Swanson

In this episode of Better System Trader, Andrew Swanscott interviews Jeff Swanson about avoiding curve fitting in systematic trading using a technique called independent testing. Jeff shares his background in trading, starting from high school to discovering systematic futures trading. He explains independent testing as a method of testing filters individually rather than stacking them, which helps avoid overfitting and understand the impact of each filter. Jeff details his process, which involves starting with a key idea, testing filters against a baseline, and then combining them while looking for significant impact. He also discusses the importance of not torturing the data, using a minimum viable system, and the mindset required for systematic trading, emphasizing decision-making with imperfect information.