building my first fully mechanical system, what actually kills people here

[coldvision]

moving from discretionary toward a fully mechanical, rules-only system so my emotions stop wrecking my trading. before i sink months into it, what are the mistakes that kill people building their first system? id rather know the landmines now than rediscover them the expensive way.

[Dean]

the number one killer is overfitting, adding rules and tweaking parameters until the backtest looks beautiful, which just memorises the past instead of capturing a real edge. the second is testing on too little data or one market regime. the third, ignoring realistic costs, spread, commission and slippage, so a system thats profitable on paper is negative live. build simple, test across many years and conditions, and always include honest costs. simplicity and honest testing beat a gorgeous overfit curve every time.

[Justin]

overfitting is the big one and its seductive because more rules always make the historical curve smoother. the discipline is fewer parameters, not more, and an out-of-sample test, build on one period, then validate on a completely separate period the system never saw. if it falls apart out of sample, it was memorisation. that single practice kills most overfitting before it costs you real money.

[lostsignal]

the real thing that kills first-system builders is believing a mechanical system removes the emotion. you just relocate it, now you agonise over whether to keep the system on, when to intervene, whether to turn it off in a drawdown. the discretion moves from entries to meta-decisions and the emotion follows it there.

[carterw]

the troll is exactly right and its the trap nobody warns beginners about. going mechanical doesnt delete emotion, it moves it up a level to the decisions about the system. the people who succeed mechanically pre-decide those meta-rules too, when to pause, the kill threshold, the review schedule, so even the override decisions are rules rather than feelings. you have to systematise your interventions, not just your entries, or the emotion just reappears one level higher.

[Caleb]

how much historical data is enough for a backtest to mean something, is there a rough minimum?

[noahsmith]

enough to include multiple market regimes, not just a number of years. you want trending periods, ranging periods, high-volatility events and quiet stretches in the sample, plus a decent number of trades, ideally hundreds, so the result isnt a few lucky ones. several years usually captures the regimes for most strategies, but the principle is regime variety and trade count over a fixed calendar length. a system only tested in one type of market will fail the moment the market changes character.

[Adam]

few parameters, out-of-sample test, honest costs, systematise your interventions too.