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How to prevent overfitting

When developing a trading system, a major pitfall that can creep into system development is the desire to find a strategy that worked phenomenally in the past. This is known as overfitting. Research by leading authors in the quantitative field has shown that not only is an overfitted system unlikely to generate profits in the future, but also that its performance can lead to losses.

According to the video, which of the following steps can you take to reduce the chance of overfitting a trading system?

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