As the factor does not do well in the training set, why didn't you tweak it further?
Ouch. Sad to relate, in my view and in my experience of trading futures "tweaking" is the very spawn of Beelzebub. I have made that mistake so often. I prefer James approach: if one period looks bad, move on to other periods and see if that one period was anomalously bad in a sea of goodness.
If all is till looking dismal, dump it.
I do think these guys have it largely right: Mathematical Investor
Let me expand a little. I have been working hard on the various Q tools over the past week and thinking hard also about what they want. When you take a look at Example Long Short Equity Algorithm you become very aware how tightly Q have tied up what they want.
They have already set so many parameters: dollar neutral, sector neutral, factor neutral, choice of universe, max gross leverage, winsorisation, optimisation with constraints. All you have to do is to choose the factors. One at a time in the case of alphalens - at least when your are making your choice for eventual input into a "combination factor".
So take EPS growth by way of example. It is a quarterly event (unless you convert into some daily metric - eg the related PER). I'm not sure I am happy fiddling much further with it. It either dives price or it does not. Perhaps it does not drive price (or is ignored in one particular year) but if it does not I prefer the approach of trying out a few different years to see overall whether the assumption is correct.
I can see that the use of moving averages my be of use (with PER for instance - although that will take us ominously close to the already closely related factor of momentum). But I'm not too sure about tweaking it much further. The parameters are already so many and so tightly set.
I may be talking in ignorance but it seems you have already gone so far down the line in terms of rigid system design that further tweaking seems a bit ominous. Perhaps I will veer from the paths of righteousness as my journey progresses.