David Aronson, Timothy Masters – Statistically Sound Machine Learning

The book is used for two purposes. Before it is put to real-world use, it teaches the importance of using sophisticated yet accessible statistical methods to evaluate a trading system. The techniques are illustrated with step-by-step examples and explained in plain language in order to accommodate readers with limited mathematical background. The book shows how the free program can be used to develop and test trading systems. The machine learning and statistical Algorithms available in TSSB go far beyond those available in other off-the-shelf development software. The use of these state-of-the-art techniques greatly improves the likelihood of obtaining a trading system whose impressive backtest results continue when the system is put to use in a trading account. This book will teach the reader how to: Estimate future performance with rigorous algorithms, evaluate the influence of good luck in backtests, detect overfitting, and estimate performance bias due to model fitting and selection of seemingly superior systems.