Shrink fitting ratio is an important design parameter in assembling compound forging dies. However, the determination for the optimal parameter to prolong die life is often neglected in the industry. Thus, the authors propose a method to identify optimal shrink fitting ratio by the use of master fatigue diagram to achieve maximum fatigue life where the working conditions under multi-stress tension-compression mode and various oscillation amplitudes are considered. In this paper, a master fatigue diagram was made from experimental results obtained for the die insert materials SKD11 and it is then applied to determine optimal shrink fitting ratio for the 2-layer compound forging die in backward extrusion. The method shows the capability of improving fatigue life from 104 to 105 cycles or even up to higher number of cycles if optimal shrink fitting ratio can be determined.