Anchored vs rolling walk forward analysis WFA

If you take the above example but make the optimisation window bigger and bigger you arrive at an anchored WFA. The optimisation is anchored since it always starts at the same point of time (Figure 6.2A). This is the simplest form of WFA. It usually works best, like the static optimisation we examined above, when the tested market keeps its personality within the tested sample.

Figure 6.2A: Anchored walk forward analysis. For every new optimisation run the in-sample optimisation window starts at the same point of time but its length is subsequently increased. The unseen out-of-sample data follows.

Figure 6.2A: Anchored walk forward analysis. For every new optimisation run the in-sample optimisation window starts at the same point of time but its length is subsequently increased. The unseen out-of-sample data follows.

However, as you know, markets and their personalities can be complex. Sometimes a market will show an equity curve that has some very profitable and some not-very-profitable intervals within the tested data ranges. If a market appears to have such a changing personality then the anchored WFA may be not the best method. In these cases it is necessary to perform an optimisation method which better adapts to changing market conditions, the rolling WFA (Figure 6.2B). The rolling WFA is particularly appropriate for short-term intraday systems.

Figure 6.2B: Rolling walk forward analysis. Shifting in-sample optimisation window = 1 year and shifting unseen out-of-sample data = the 3 following months.

Figure 6.2B: Rolling walk forward analysis. Shifting in-sample optimisation window = 1 year and shifting unseen out-of-sample data = the 3 following months.

The better adaptation of the rolling WFA may mean it is more appropriate, and may yield results that walk forward better, in live trading than results obtained from an anchored WFA.

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