1 © Timothy Masters 2018 T. Masters, Testing and Tuning Market Trading Systems, https://doi.org/10.1007/978-1-4842-4173-8_1 CHAPTER 1 Introduction Before we delve into the meat (or tofu, if you prefer) of this book, we should be clear on what you will and will not find here, as well as what degree of preparation is expected of readers. The Target Audience, and Overview of Contents This book is intended for readers who have a modest statistics background (Statistics 101 is plenty), have some programming skill in any language (C++ with a strong bent toward traditional C is used in the examples here), and are interested in trading financial markets with a degree of mathematical rigor far beyond that of most traders. Here you will find a useful collection of algorithms, including sample code, that will help you tweak your ideas into trading systems that have above-average likelihood of profitability. But there are many things that you will not find in this book. We begin with an overview of the material included in this book. What’s in This Book The following topics are covered in this book: • If your system involves optimization of parameters, and most do, you will learn how to determine whether your optimized system has captured authentic market patterns or whether it has simply learned random noise patterns that will never again appear. • You will learn how to modify linear regression in a way that makes it even less susceptible to overftting than it already is and that, as a bonus, separates predictors into those that are valuable and those that are worthless. You will also learn how to modify linear regression to enable its use in moderately nonlinear situations.