If you have a mechanical trading system that you backtest & perhaps optimise in TS8.3, metatrader, ninjatrader, metastock etc. there are 3 possibilities when you trade the system live -

1. forward test results will be less profitable than backtest results.
2. forward test results will be more profitable than backtest results.
3. forward test results will be about equally as profitable as backtest results.

If you trade/have traded mechanically, how have your backtest & forward test results compared, and what factors do you think influenced the similarity/difference between your BT & FT results.

Backtesting allows you to develop an idea, but if your idea is complex it is very easy to "curve fit" or over optimize the system so that it works too specifically on the "in sample" data only, and would not produce anything like those results in real life. testing it on "out of sample" data gives you a chance to see how it would have performed on unseen data and give you an indication of whether it is too optimized or not.

Thanks.