From CSI’s Technical Journal:
“Every process you consider [in a trading system] requires some level of decision-making control to force a market profit. Your trading algorithm should have at least one trigger to explicitly buy or to sell a given commodity [or any market for that matter], and to take a profit or a loss as time and market conditions unfold. These triggers, called parameters, can be used alone or in conjunction with other triggers to develop specific trading signals. Overcomplicating the decision that gets you into the market tends to consume statistical degrees of freedom. The more freedom you take out of the market (adding process control), the less chance your trading algorithm will be successful. Factors such as commissions, slippage and inevitable errors made by you and your paid partner, the broker, all impact the likelihood that the market will pay back your risk capital. Excessive parameter control artificially minimizes their impact.”