Overfitting (curve fitting)
Overfitting means tuning a strategy so precisely to the past that it captures noise rather than a real edge, and then fails live.
With enough parameters, any strategy can show a perfect backtest curve: RSI at 13 instead of 14, a 27-pip stop, a time filter down to the quarter hour. The system has simply memorised the history.
Warning signs: many parameters for few trades, results that collapse when you change a setting slightly, spectacular performance in one period and poor in another.
To avoid it, keep rules simple, test on a reserved period you didn't use for optimisation (out-of-sample testing), then confirm with a forward test. A robust strategy holds up across a range of settings, not just one.