Parameter Sensitivity Analysis
Parameter sensitivity analysis systematically varies a strategy's input parameters (RSI period, moving-average length, stop-loss percentage) and measures how performance changes. A robust strategy remains profitable across a wide parameter neighbourhood; an overfit strategy is profitable only at one precise setting.
How to run a sensitivity sweep
Pick your primary parameter and vary it by ±20–30% in equal steps. Run a full backtest for each value. Plot Sharpe ratio (y-axis) vs. parameter value (x-axis). A smooth, broadly peaked curve indicates a robust setting. A single sharp spike indicates curve-fitting — the result is unlikely to generalise.
What if my strategy is sensitive?
Sensitivity is not automatically disqualifying, but it raises the bar for other evidence. Combine sensitivity analysis with walk-forward analysis and the Deflated Sharpe Ratio for a complete robustness picture.