Optimization is a general term that can be used in any context and in any background. Such as in the context of technical analysis optimization can be defined as the process of making a trading system, financial system, production system, manufacturing system or any other system that makes the business entity more efficient and more effective. A number of adjustments that are made by changing the number of periods in the moving averages and changing the number of indicators that can be financial indicator and changing all the activities that are actually not working.
For example the optimization of a trading system own by an investor that is running its trading system comprised of closing price and the moving average of the system owned by the investor. Now in order to optimize the trading system the investor will change the moving average or by changing the period length of the periods the inventor can achieve an optimized system that will have different percentages of profit, risks, capital draw downs, revenues and still other kinds of things. The process of optimization helps in creating an efficient and effective trading system by choosing the optimal and effective parameters to the trade.
There are a number of optimization techniques depending upon the area and the context in which we are going to implement optimization strategies. The major objective of optimization is to make a system fully functional, profitable and efficient by eliminating non-optimized variables.
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