Quantitative Trading Systems

In-sample

During the model development process, data is divided into two sections. The in-sample data is used to develop the model, the out-of-sample data is used to verify that the model has detected patterns in the data that are predictable and tradable.

Out-of-sample

During the model development process, data is divided into two sections. The in-sample data is used to develop the model, the out-of-sample data is used to verify that the model has detected patterns in the data that are predictable and tradable. The best estimates of future performance of a system are obtained when the out-of-sample period follows the in-sample period.