EdgeWare FastBreak Pro User Manual Version 6.2
FastBreak
Pro
Version 6.x
www.edge-ware.com
Disclaimer and License Agreement
The information that FastBreak Pro provides is only part of the information needed for a
good investment program. Consult your investment representative before buying or
selling any investment. Read the prospectus to determine whether an investment meets
your objectives.
EDGE WARE, INC. DOES NOT RECOMMEND SPECIFIC INVESTMENTS
SUITABLE FOR YOUR PERSONAL OBJECTIVES BUT IS LIMITED TO
PROVIDING INFORMATION FROM THE BEST AVAILABLE SOURCES.
HOWEVER, THESE SOURCES ARE KNOWN TO CONTAIN ERRORS, AND
EDGE WARE, INC. DOES NOT ASSUME LIABILITY FOR ERRORS IN
INFORMATION. THIS PRODUCT IS DISTRIBUTED “AS IS” WITHOUT
WARRANTIES OF ANY KIND, EITHER EXPRESSED OR IMPLIED.
NEITHER EDGE WARE, INC. NOR ANYONE ELSE INVOLVED IN
CREATING, PRODUCING, OR DISTRIBUTING THIS PRODUCT SHALL BE
LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES ARISING FROM THE USE OF THIS
PRODUCT.
Program and documentation copyright 2009 by Edge Ware, Inc. All rights are reserved.
The software packaged with this manual is not copy-protected. Duplication of this
software is limited to one backup copy. No part of this manual may be reproduced or
transmitted in any form without written consent from Edge Ware, Inc.
FastBreak, FastBreak Pro, FastGraph, and the Edge Ware logo are trademarks of Edge
Ware, Inc.
FastTrack is a trademark of Investors FastTrack.
Windows 95, Windows 98, Windows NT, Windows 2000, Windows Me, Windows XP,
Windows Vista, Office, Notepad, and Excel are trademarks of Microsoft Corporation
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Table of Contents
1.0 Preface........................................................................................4
2.0 Introduction................................................................................5
3.0 Upgrade Notes ...........................................................................6
4.0 How FastBreak Pro is Different from Standard FastBreak..... 12
5.0 Installation................................................................................14
6.0 Technical Support and Upgrades.............................................15
7.0 FastBreak Pro Operation..........................................................17
8.0 Running FastBreak Pro Optimization......................................39
10.0 Suggestions for Building Better Systems..............................62
11.0 Frequently Asked Questions and Common Problems...........76
Appendix A -- Technical Discussion.............................................79
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1.0 Preface
Note: A PDF copy of this manual is on your installation disk. We recommend you put
a copy on your computer so you will always have a copy available.
FastBreak Pro has the look, feel and all the functionality of Standard FastBreak. Where
FastBreak Pro is different is that it has the automated system optimizer and builder. The
Standard Manual contains explanations and details of all the functions common to both
versions. This FastBreak Pro manual is to be used in tandem with the Standard FastBreak
manual, and it covers the operation of the Genetic Algorithm (GA) optimizer and other
functions unique to FastBreak Pro.
When we refer to mutual funds in the manual it will also apply to stocks unless otherwise
noted.
FastBreak Pro is a very sophisticated investment strategy development application. If you
are new to FastBreak it can look very intimidating when you first launch the program.
However, if you read the manuals and run the examples provided, you will quickly
develop an appreciation for FastBreak Pro. The vast majority of users very quickly are
making runs and developing effective trading systems.
We have put options in FastBreak Pro that many users will never use - and there is
nothing wrong with that. If there is an option you don’t understand on the initial reading
of the manual, don’t activate it; come back to it at a later time as your experience grows.
One mistake some users of FastBreak have made is to start out activating all the options
and choosing the most complicated strategies. Although we have incorporated a lot of
error checking of user inputs to make the software error resistant, it is possible to get
errors. If you start out making several changes to a run and then get an error, it will be
very difficult to determine what went wrong. We provide examples that are good starting
places. Start slowly. You can setup the examples with a minimum amount of effort,
make one or two small changes to customize to your needs, and be on your way.
As you want to go deeper into designing trading systems you may want to checkout the
resources we listed in the Resources chapter of the Standard FastBreak manual.
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2.0 Introduction
Edge Ware, Inc. released the initial Standard FastBreak version in early 1996 to allow
investors to design, evaluate and trade fund rotation investment strategies. An early
version of Standard FastBreak was reviewed in the July 1999 issue of Technical
Analysis of STOCKS & COMMODITIES, the premier technical analysis investment
magazine. Their review, in part, said, “This is easily the most elaborate fund switching
software we’ve run across, and it’d be worth the time to check it out.” FastBreak Pro is
“light years” more advanced that the version reviewed by the magazine. FastBreak Pro
was introduced in early 2000 and the reception by professional and individual investors
has been overwhelming.
Since the initial release of Standard FastBreak, the number of available options and
parameters for building strategies has increased dramatically. This has made it
increasingly time consuming for those users who want to build complex trading strategies
that take advantage of all the new features. Many users requested the capability to
optimize FastBreak trading systems by exhaustive evaluation of all the parameters
available in FastBreak. This is not practical because of the almost unlimited combination
of parameters. There is also the significant problem of “over-optimization” of parameters
that can lead to fantastic historical performance but poor future predictive performance.
The problem of optimizing a complex, multivariable problem is very difficult. Most
optimization routines have the undesirable characteristic of finding “local” solutions
rather than a “global” solution, that is to say, they find good (local) solutions but not the
best (global) solution. Then there is the added issue of over-optimization. Edge Ware
investigated various methodologies to help automate this process and determined that a
“Genetic Algorithm” provides the best solution.
Genetic Algorithms are a relatively new branch of mathematics. They are a very
powerful technique, but at the same time users don’t need to know all the details of how
the process works. We have tried to make FastBreak Pro as close to a “push the button”
program as possible with little interaction required from the user. Using only the default
parameters you should be able to develop very effective trading systems.
Edge Ware, Inc
* FastBreak Pro relies on the Investors FastTrack database. For those not familiar with
FastTrack, it is a mutual fund/stock database and software analysis package. The
database is updated each day the market is open with the closing prices of thousands of
mutual funds, stocks, and indexes. Users of FastBreak must be subscribers of FastTrack
(call 800-749-1348 or visit www.fasttrack.net) to access the required data. Do not call
FastTrack for information relating to Edge Ware products.
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3.0 Upgrade Notes
Maintaining Existing FastBreak Trading Strategies
If you have existing FastBreak strategies that you like we recommend that you keep the
old version of FastBreak on your computer until you have verified that the strategies
produce the same results with the new version. Prior to installing the new version of
FastBreak go to the folder where the existing version is located, typically ftbreakp for Pro
users, and find the file ftbreakp.exe. Rename this file ftbreakpV5.exe. Now put a
shortcut to this file on your desk top.
We also recommend that if you have a prior version then install the new version in a new
folder, e.g., ftbreakp6. This will allow you to segregate your new files and systems that
are associated with this new version.
If you see significant changes in favorite trading strategies then continue to run these
strategies in your old version of FastBreak until you have a chance to create new
strategies in the new version. You can have multiple versions of FastBreak installed on a
computer so there is no problem running these old strategies.
Changes in Version 6.2
This section will cover enhancements in FastBreak Pro Version 6.2 and is of interest to
users of previous versions of FastBreak Pro.
Version 6.2 (V6.2) is the first release version of V6.X It has exactly the same
functionality of beta V6.1 that some users may have tested.
V6.1 of FastBreak Pro was a beta version that could be run by users of V5. We made the
beta available free of charge for V5 users. V6.1 will continue to function; however, going
forward we will not maintain the beta version. Now that V6.2 is the official release
version any future enhancements or bug fixes will build upon V6.2 If bugs are fixed in
version 5 then upgrades of version 5 will be made, i.e., V5.5, V5.6 etc. Users of versions
prior to Version 6 will need to upgrade if they want to take advantage of any future
enhancements. Our policy is to provide technical support to the most two recent versions,
e.g., V5 and V6
Trendline Stop and Buy Filters
Version 6 provides trendline Buy Filters and Sell Stops. Trendlines are one of the oldest
and still most useful technical analysis tools. Trendlines can be used to determine when a
stock or mutual fund has broken down in an upward move, i.e., used as a sell Stop, or
trendlines can be used to determine if a downward move has ended and it is safe to buy,
i.e., Buy filter. The vast majority of trendline users use a manual method to draw the
trendline on a paper chart or a computer screen. Programming a computer to calculate a
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trendline that a human brain can draw in a few seconds is a daunting task; however, there
is a tendency when manually drawing trendlines to “force” the line to other expectations.
A mathematical algorithm is not subject to such expectations, but at the same time cannot
“see” other potential complications and complexities.
The optimizer in FastBreak Pro will help determine if a trendline Buy Filter or Sell Stop
is effective. It will determine if a logarithmic or arithmetic trendline is most effective,
and determine the parameter that controls the way the trendline is calculated.
Adding trendlines to the Buy Filter and Stops required changes in the layout to a number
of display screens, but you should quickly become comfortable with the new layout.
Details of the Trendline algorithm is provided in the Appendix A of the Standard
FastBreak manual, and issues to consider when using Trendlines with the optimizer are
discussed in Appendix A of this manual.
NOTE: The algorithm to determine trendlines is very computer time intensive. You will
notice a long delay at the beginning of the optimization as trendlines are calculated for
all trading family members. If the trading family is large, i.e., hundreds of members,
then it may take an hour or more before the first strategies begin to be evaluated. The
program may look like it is frozen but it is busy calculating trendlines. See Appendix A
for details.
Delay Activation of Stops in Optimizer
FastBreak Pro V6 adds an option to the optimization process to suspend all Stops for a
user defined period of days after a fund is purchased. We added this feature for a couple
of reasons. One, we have users who use fund families that absolutely prevent exiting a
fund for a fixed number of days, e.g., 7 and 30 days are quite common, after a fund is
purchased. The second reason is that some companies will allow you make short term
trades, but limit you on the number of short term trades. Fidelity for example, will only
allow a limited number of short term (less than 30 days) trades during a 12 month period.
If a users wants to build a trading strategy to either prevent or limit the number of short
term trades this new feature will prevent any of the stops from being effective. The
option is at the top of the screen where Stop optimization ranges are set.
Changes in Version 5
The following list of changes covers upgrades from Version 4 to Version 5. Some users
may be upgrading from very old versions, and a section follows to cover upgrades from
Version 3. You may ask how Version 5 of FastBreak Pro is different from previous
versions and if you should reread the manual. The answer is that the changes are
extensive and we suggest you read the entire manual to understand the enhancements.
The examples are for the most part unchanged, and you can skip these sections if you are
a veteran FastBreak Pro user.
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Changes between Version 4 and Version 5
Version 5 of FastBreak Pro dramatically improved the optimization time when using
FNU data files. FNU files are in a simple data format that FastTrack uses allowing a user
to create data that isn’t in the FastTrack data base. Users create FNU files for a wide
range of reasons. For example, users who want to create trading systems using synthetic
versions of high beta index funds. These funds haven’t existed for a long period of time
so systems can’t be tested over a long period of market history; however, it is quite easy
to create synthetic versions of these funds that extend over a long period and the data can
be stored in the FNU format. See FastTrack Help for more information on the FNU
format. FNU data can’t be read as quickly as data in the FastTrack database. The
FastBreak Pro optimizer would read the trading family data each time a strategy was
evaluated. When FNU data was used this would slow the optimization process by a
substantial amount.
Version 5 of FastBreak Pro was modified to read the data only once at the start of the
optimization process. This modification allows the optimizer to run approximately four
times faster. There will only be a small, perhaps 10%, improvement in optimization time
when using only data from the FastTrack database. There is no effect on the execution
time of a single strategy. If a FastBreak Pro user selects the Optimize Family option the
new version will not optimizer any faster than the old version. This is because when the
Optimize Family option is used custom families are created for each strategy evaluated;
therefore the family data is read for each strategy so the data is read over and over again
just like previous versions of FastBreak Pro.
Capability to build market timing systems and signal files.
o We believe this is the most exciting new functionality. The optimizer and out-
of-sample testing capability in FastBreak Pro make building market timing
signals a snap.
o This functionality was developed, in large part, to better trade individual
stocks. Over the years we have found that FastBreak stock trading systems
have the potential for fantastic returns, but we have also found that controlling
drawdown is a challenge in bear markets. We have found that even in severe
bear markets there will be stocks that rally strongly, however, these rallies
often fail resulting in a whipsaw trades. We saw the need for market timing
signals that would keep the trading system out of the very worst of markets.
There are numerous market timing signals available but so many of these are
not robust and fail the test of time. Also, we wanted to develop our own
signals that met our needs, e.g., switches per year, drawdown, markets traded
etc.
o One disadvantage of the many market signals available is that they are
developed for a specific index, e.g., S&P 500 Index. Often there is a
divergence in different stock indexes, i.e., small cap stocks performing well
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while large cap stocks are not. FastBreak allows the use to combine multiple
indexes (or any stock, fund, FNU file) into a family. This allows the user to
build signals that stay in a buy mode if any of the indexes are in an uptrend
and will only signal a sell signal if all are in a down trend.
o We have used this capability to build signals for trading diversified mutual
funds and individual stocks. We have also used it to build market sector
specific signals; for example, we have built signals to build trading systems
for energy stocks.
o Signal file building systems can be run like a regular FastBreak trading
system, except the output is a FastTrack signal file. This signal file can then
be used in a FastBreak trading system or other FastTrack applications.
Rank using Ulcer Performance Index (UPI). This option will tend to purchase high-
UPI funds and produce strategies that have a high UPI equity curve.
Rank using Sharpe Ratio. This option will tend to purchase high Sharp Ratio funds
and produce strategies that have a high Sharp Ratio equity curve.
Removed the Long Rank + Short Rank momentum ranking option. This option had
the tendency to give ambiguous ranking order because the value produced was an
integer (whole) number and more than one fund could have the same value.
Removed the Families/Individual option on the Funds/Index tab. This option was
never very useful.
Changed the logic in the Harnsberger option. Previously, Harnsberger would only
trigger a sell if you were not holding the top Buy ranked fund. This made sense on
early versions of the program when we didn't have buy filters. Now, it is very
common for you not to hold the #1 Buy ranked fund because of the filters. Also, with
some users having large numbers of funds or stocks in their trading families, the
difference in rate of change between the #1 Buy ranked fund and the Nth Buy ranked
fund may be very small. However, the Nth ranked fund may meet all your buy criteria
when the #1 fund does not. We changed the logic so that it will always try to buy a
top ranked fund that meets your buying criteria. The fund sold must meet your
minimum holding period value. This is now very similar to setting the top % to zero
percent. One difference is that if more than one fund can be sold on a given day the
Harnsberger option will sell the weakest (as measured by Sell ranking) fund. We now
put an H in the Why Detail file column to indicate a Harnsberger sell.
Stop loss using a short/long Exponential Moving Average (EMA) crossover. This is
similar to the current EMA stop except that the fund NAV is smoothed with a short
term EMA.
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Buy filter using a short/long Exponential Moving Average (EMA) crossover. This is
similar to the current EMA Buy filter except that the fund NAV is smoothed with a
short term EMA.
The next four enhancements are all similar in that they allow the user to modify stop
or buy filter options according to market conditions or a user defined input file. The
modification is triggered when an index (or any user defined fund or FNU file) drops
below its user defined EMA line. For example, if the S&P is used as the index then
the parameters are not modified as long as the index stays above a user defined EMA
line. If the S&P falls below its EMA line then a factor is applied to the standard
value. A simple example is that when the market is in a strong uptrend high beta
funds may be a good investment option. However, when the market is in a downturn
or trading market it may be prudent to purchase low beta funds.
o Adjust the Trailing Stop Loss value based on market conditions or external
file input.
o Adjust the EMA Stop value based on market conditions or external file input.
o Adjust the Beta Buy filter value based on market conditions or external file
input.
o Adjust the EMA Buy filter value based on market conditions or external file
input
Beta buy filter can now be a non-correlated beta as an option. Beta is the ratio of the
volatility of a fund divided by the volatility of an index (typically the S&P 500),
multiplied by a correlation value between the fund and the index. If a fund has a low
correlation to the index it can have a low beta but be a very volatile fund. An
example would be a gold fund. Gold funds have a low or even negative market
correlation and yet are very volatile. Filtering on standard beta may not filter out a
gold fund. Using the non-correlated beta filter allows a user to mix a wide range of
fund types including those that may not have a high market correlation value, e.g.,
bonds, international etc., in a trading family and have the ability to filter those with
high volatility.
Improved the BOSS stop option to be more effective with some ranking methods.
Ability to begin the effectiveness of a stop option later than the first day. Previous
versions required the stop to be in effect on the first day a fund was purchased. Some
users have the requirement to hold a fund for a fixed number of days after purchase.
They can now start a stop after this number of days.
Ability to search the Buy and Sell ranking list by fund symbol. Some users have very
large trading families and it is difficult to locate a particular issue in the ranking list.
This option allows the user to do an efficient search for the fund symbol.
Additional Changes between Version 3 and Version 5
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Note: You can load trading systems developed with Version 3 of FastBreak into this
new version, however, you must input the beta /correlation index and calculation
period on the Funds/Index tab. After you have entered this information you will need
to resave the DFT file.
Here is a short list of some of the major enhancements:
Better Opportunity Sell Signal (BOSS)
Numerous buy filters: EMA, parabolic, RSI, beta, and correlation
New information in summary output (Beta, Alpha, and Correlation)
New information in detail output to explain why a fund was sold
Because of changes in program calculation logic, you may see changes in results from
your trading systems developed with prior versions of FastBreak Pro. Here are just a few
examples:
We removed the Adaptive Moving Average as a stop option. This was done because
we never found the AMA to be a particularly effective stop option, and we wanted to
make room on the Stops tab for a much more effective new option called BOSS.
Change in the logic for the Rate of Return Sell stop. We now check a candidate fund,
prior to purchase, to verify that it exceeds the stop parameters specified.
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4.0 How FastBreak Pro is Different from Standard FastBreak
Our intent when we designed FastBreak Pro was to automate development of mechanical
trading systems. We wanted to provide the capability to build very complex strategies
while taking the “grunt work” out of the development process. Edge Ware, Inc. believes
that mechanical trading systems are appropriate for most investors, both professional and
individual. Mechanical trading systems have very specific trading rules, can be back
tested for historical performance, and give specific trading buy and sell signals for funds
or stocks. There are no charts for the investor to interpret or second-guess. One of our
favorite books is Robert Pardo’s Design, Testing, and Optimization of Trading Systems.
Here are his words: “Why use a trading system? The purpose of trading is to produce
profits. The main reasons a trading system helps this pursuit are its quantifiability,
verifiability, consistency, and objectivity.”
Standard FastBreak can be used to develop parameters for mechanical systems using data
inspection and graphical evaluation to determine robust parameters. This can be time
consuming and does not easily allow the user to take advantage of all the parameter
combinations. For example, a user may want to reduce the maximum drawdown (MDD)
of a trading system. This can be accomplished by holding additional funds, adding a
correlation check, trying various stops, or combinations of all these parameters, This can
be accomplished, but only with much manual interaction and study. FastBreak Pro uses
very sophisticated techniques to automatically build complex trading systems with
minimal manual interaction.
The majority of this manual refers to mutual fund investing. However, FastBreak Pro is
equally effective for developing stock trading systems.
FastBreak Pro incorporates a proprietary breakout technique (BOOM) that allows entry
into a fund earlier in a price breakout than can be obtained with standard ranking
techniques. This method has proven to be very effective in our increasingly dynamic
markets. The nature of this option makes manual selection of its parameters very
difficult, but the GA optimizer is very effective in finding effective parameters.
Here is an example of how to use FastBreak Pro. You may want a trading system that
trades international funds. You would first specify a trading family (list of funds that you
are interested in trading) and specify your performance criteria. Your performance
criteria may consist of a maximum acceptable draw down (MDD), a maximum number of
fund switches per year, a minimum acceptable UPI, and maximum profit within these
limits. At this point you click the execution icon and let FastBreak Pro do the work.
FastBreak Pro will try all the different trading parameters and combination of parameters
that are available in FastBreak Pro to maximize your investment return while meeting
your other constraints (MDD, UPI, and switches per year). FastBreak Pro can also
optimize your trading family, this is to say, FastBreak Pro will reduce your initial choice
of funds to a more optimized subset. There are almost unlimited parameter combinations
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to try, and this is why FastBreak Pro uses a very sophisticated genetic algorithm (GA) to
evolve the parameter choices.
Determining optimized parameters that maximize your investment objectives is only part
of the problem. Trading system developers must constantly be wary of “overoptimization” or “curve-fitting” of parameters. FastBreak Pro avoids over-optimization
by using various techniques, but the most important technique is automated “walk
forward” or out-of-sample testing. This simply means that a portion of recent historical
data is used to test and confirm that the trading system continues to have good predictive
performance. The user can actually watch and see when over-optimization is starting to
occur during the optimization process.
When FastBreak Pro has completed the optimization process, you can automatically save
the best trading system parameters. These trading parameters can be loaded with a couple
of mouse clicks into FastBreak Pro and run on a daily basis to determine if any trades are
to be made. Trades are mechanical, that is, the specific funds to buy and sell are named
on specific dates.
The professional money manager or individual investor can quickly use FastBreak Pro to
develop numerous trading systems. The money manager may have a need to develop
trading strategies that meet the risk tolerance of various clients. For example, one client
or group of clients may have a high risk tolerance and want to maximize annual returns.
A second set of clients may be very risk averse and be satisfied with reduced returns to
obtain that reduced risk. The money manager can specify the level of risk and let
FastBreak Pro determine the trading parameters.
The individual investor may have a need for a variety of trading systems. For example,
an individual may want to have a small portion of his investments in a very aggressive
trading system, a larger amount in a more conservative system, a third portion always
invested in international funds, a fourth account with an annuity company, and finally, a
portion in bond funds. FastBreak Pro can quickly and easily allow the investor to develop
trading systems for each of these accounts and modify or re-optimize the trading systems
in the future as new mutual funds become available.
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5.0 Installation
New users should first read the Standard FastBreak manual supplied with your purchase.
That manual describes all the parameters and options available and how to operate the
basic functionality. It is important that you understand how the various options and
parameters in FastBreak Pro operate. This supplemental manual focuses on the
automated optimization process in FastBreak Pro.
FastBreak Pro installs exactly like the standard version of FastBreak. Please refer to the
installation instructions in the standard FastBreak manual.
The FastBreak Pro optimizer is very numerically intensive. Optimization runs will
typically take hours or overnight. Remember, this is computer time, not your time!
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6.0 Technical Support and Upgrades
Note: Do not call Investors FastTrack for technical support.
Do not use the 800 order line number for technical support. This is a commercial
order line that only takes orders and they are not equipped to answer any questions.
Any messages left with the order line will not be returned.
Please read this entire manual and check the FAQ chapter before calling for support.
We have tried to make this software and documentation as user-friendly as possible. You
should have a basic working knowledge of Windows, i.e., how to copy and move files,
change directories, select drives, etc.
Technical support is provided by email or via the Discussion board. You will usually
receive a response within 24 hours. We encourage you to post questions of general
interest on the Discussion area of our web site www.edge-ware.com. This allows us to
help several users at once. If you post a question on the web site, email us to let us know
you posted the note.
We can be contacted at email2ew@edge-ware.com. This address will send your note to
both Ken and Nelson and will help you receive a timely response. We recommend that
you always use this address. If one of us is traveling or otherwise unavailable your note is
likely to be answered sooner if it is sent to both of us.
If your support issue can’t be handled by email, we will arrange for telephone support.
We charge $25 for replacement installation CDs.
There is no charge for most technical support. Problems with reinstalling FastBreak is
our number one tech support problem. We receive a large number of support requests
from users reinstalling FastBreak because of hard drive failures, purchase of new
computers, etc. We reserve the right to charge $25 to assist in reinstallation of the
product, starting six months after purchase. If you follow the following steps you
shouldn’t have any problem reinstalling.
Reinstalling FastBreak
You MUST use the installation CD to reinstall. We have had a number of users just try
to copy files to the new computer or hard drive. This will not work. Here are the steps:
Install FastTrack first
Do at least one download and update of FastTrack data
15
Verify that the FastTrack account number on this computer matches the account
number on the FastBreak CD
Install FastBreak using the installation CD
Go to our web site and download the latest upgrade, if one exists
Upgrades
We provide minor upgrades to FastBreak on our web site, and if you encounter an error,
we suggest you download the latest version of the software because this will often solve
the problem. The Edge Ware Internet Web site (www.edge-ware.com) always has the
latest version for download.
FastBreak is constantly improving, and we try very hard to get those improvements in the
hands of our users as fast as possible. As we make changes new versions are often placed
on our web site for free downloading along with a notice in the Discussion area of the
website with comments about the upgrade. This creates problems with keeping
documentation up-to-date for the latest version because it isn’t practical to rewrite the
manual each time we make a change. In most cases, the installation you receive will
actually be the most recent version, and there may be an addendum in this manual that
will describe how the recent version is different from what is described in the main body
of the manual.
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7.0 FastBreak Pro Operation
We recommend that you read this manual in the order it was written; however, if you
have experience with Standard FastBreak or just can’t wait to see the program in
operation, go to the Examples chapter. Note: The way FastBreak Pro looks on your
computer may appear slightly different than the views in this manual. This is the
result of screen resolution differences or you may have a newer version of the software.
Strategy Screen
After you launch FastBreak Pro use the following icon to bring the first optimization
screen:
The first of the optimization strategy screens looks like the following:
Note: When you place your cursor on the icons a description is displayed.
17
To switch back to the “Standard” FastBreak screens described in the standard manual use
the icon on the far right of the icon tool bar:
The following icons are used to control the standard FastBreak options. These icons
should be familiar to users of the standard version:
The following icons are used to control the strategy optimization aspects of FastBreak
Pro:
The first strategy screen is used to select the Buy/Sell Strategy, Trading Family, Money
Market Fund, in-sample and out-of-sample trading dates, and optimize the trading family.
The first item to select is the trading family. Use the following button to select a trading
family:
This will open a window that allows you to select from the standard FastTrack defined
families or any of the user-defined families. You can use the FastTrack family editor to
build your custom trading families.
If you want to optimize the trading family use the Optimize Family check box:
Note: This is an advanced feature and we recommend using it only after you have
become familiar with FastBreak Pro.
FastBreak Pro will try different combinations of funds from your trading family to obtain
better results. If this option is not checked, FastBreak Pro will always use all the funds in
your trading family.
Note: If you use this option you can only use a seven character name when you save
your best trading strategies. The reason is that FastBreak Pro will save the optimized
trading families using this name. It will also append a number between 0 and 9 to the
end of the name. This will make the optimized family eight characters long which is
the naming limit for FastBreak Pro and the old DOS version of FastTrack. More
about this note later in the Example chapter where an example uses this option.
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2ndNote: the Optimize Family option is not available when using trendline Stops or
Buy filters. See Appendix A for details.
To prevent over-optimization of the trading family, enter a Minimum Family size value:
This option will keep a reasonable number of funds in your trading family and prevent
finding a final optimized trading family that has too few funds to work well in the future.
The minimum family size is the lower limit on your trading family. For example, you
may have a trading family of 40 funds, and you may want to keep at least 20 funds in the
family. FastBreak Pro will build temporary trading families that are subsets, containing
between 20 to 40 funds, of the full 40 funds. However, it will not build families with less
than 20 funds. Note: It is important to select a Min Family Size or an IS Start Date
such that you have enough funds under the worst conditions. Remember, some of the
funds in your family may not exist at the beginning of the test period. If you set the
Min Family Size too small, a test family could be built of these funds. This could result
in a condition where not enough, if any, funds are available at the start of the IS test
period. A second issue to remember is that FastBreak needs data prior to the start of
the IS start date to do an initial ranking and to calculate other parameters such as
correlation, EMA stops etc. Therefore, you should look at your trading family in
FastTrack (at least the maximum number of ranking period number of market days
prior to the IS start) date to determine how many funds don’t exist. Your minimum
family size should be at least this number plus the maximum number of funds you
plan to hold in the strategy. For example, if your trading strategy will hold up to four
funds, and your trading family has 20 funds that didn’t exist prior to the IS start date,
then your Min Family Size should be set to at least 24.
The family optimizer option was intended to optimize a “reasonably” sized trading
family. It was not intended to encourage the user to load a family of several hundred
or even thousands of funds and optimize the family down to the best 20 funds.
There are four dates that need to be entered:
The In-Sample (IS) Start Date is the date that you want to use to start the backtesting
optimization. The IS End Date is the final date for the backtesting optimization. If you
try a start date too early, i.e., one that violates the stops or other parameters, FastBreak
Pro will set the earliest start date possible. Note: Do not try to overrule the start date
with an earlier start date value or you can get an error during execution.
The Out-of-Sample (OS) Start Date and OS End Date define the period that FastBreak
Pro will use to do OS testing, also known as walk-forward testing, to verify the strategy’s
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predictive ability. Normally, the OS date range immediately follows the IS optimization
date range. FastBreak Pro does not require this typical order. For example, the OS
testing could proceed the IS date range. The chapter on Suggestions for Building Better
Systems has results from a study that reversed the typical date range order. Note: If you
reverse the IS and OS date orders, be aware that FastBreak Pro only performs error
checking on the IS Start Date to be certain enough data exists to do the initial ranking
and other calculations. For guidance on how to set the OS Start Date if you reverse
the order, try the traditional date order and see how early FastBreak Pro allows the IS
Start Date to be set. Now, use this or a later date in the OS Start Date as the earliest
possible date.
In general, if you want FastBreak Pro to optimize an option use the check box. FastBreak
Pro will take this as a sign to consider the option. This doesn't guarantee a particular
option will be used, but it will be considered in the optimization process. For example, if
you only want to use “Buy and Sell using Rank” as a trading strategy, then select only the
box for Buy and Sell Using Rank. However, if you want FastBreak Pro to evaluate and
try other strategies then check the box for those strategies.
You can select individual buying and selling strategies or the “Buy and Sell Strategies
(All Available)” check box to select all strategies for consideration. Note: We do not
recommend using the All Available option because it can result in extreme run time
without improvement in trading systems. Some of the ranking strategies are extremely
calculation intensive. In developing our own strategies, we only select one ranking
method per optimization run. See the Suggestions chapter for additional guidance.
For every variable that can be optimized in FastBreak Pro, you can input a range of
parameters to try. For example:
If you want to try Buy and Sell Using Rank, you would check the box and this would
indicate to try that parameter option. Next, FastBreak Pro needs a range of parameters to
try. In the above example, FastBreak will try Buy Ranking parameters between 10 and 95
days, and Sell Ranking parameters between 10 and 95 days. During optimization
FastBreak Pro will search this range to find the optimum set of parameters. Note: The
first range of text boxes is listed at Parm1 and the second range of boxes as Parm2. In
the case of some ranking strategies, such as simple Rank, Parm1 = Buy period and
Parm2 = Sell period. For other strategies, it will be a little more complicate. To
understand exactly what Parm1 and Parm2 reference for each strategy, go to the
Standard FastBreak Strategy Tab. Select a particular strategy in the pull down menu
and look at the parameter titles in left central part of the screen. For example, for
simple ranking it is the Buy parameter and Sell parameter. The left variable = Parm1
and the variable to its right is Parm2. For ranking strategies that use three variables,
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such as GAM and MAM, you will see text box ranges on the optimizer screen that
allow you to insert ranges for this third variable.
You can change the range to values other than the default values. Although the Genetic
Algorithm (GA) is very powerful, there are two advantages to keeping the range small.
First, the GA will converge much faster, thus reducing run time. The other advantage is
that FastBreak Pro tries a fixed number of different values between the minimum and
maximum range. The technical reason for this has to do with the way GA’s work, but the
effect is that to properly sample the range looking for optimum parameters, keep the
range as small as practical. For example, if the ranking range is 6 to 50 days, FastBreak
may only try 32 different values between 6 and 50 days. If a much larger range is used,
then the sampling may be too large. How can you determine a reasonable range? First,
the defaults are a very good starting point. However, if you find that the optimized
parameters FastBreak Pro determines are near the minimum or maximum value of your
range, then this is an indication that the range needs to be extended. In our example
above, if you happen to notice that the best strategies found by FastBreak have Buy or
Sell ranking periods near 50 days, then you would extend the upper range of possible
values and rerun the optimization. Note: If you know the exact values of a parameter
you want to use, then put that value in both the minimum and maximum box. This
will force FastBreak Pro to use only that value.
If you want to force the Sell ranking period to be the same as the Buy ranking period, then
check the following:
This option is explained fully in the standard FastBreak manual.
To indicate to FastBreak Pro which types of curve-fits to try when using Slope, check any
combination of the following boxes:
When using the (NC) alpha ranking method, you need to enter the alpha index to use.
The default is the S&P 500 (SP-CP).
Short EMA/Long EMA
Users of earlier versions of FastBreak Pro found that the optimizer often found an
optimum parameter in which the Short EMA was actually a larger value than the Long
EMA. This happened because the optimizer found that buying the weakest funds was
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often the best solution historically. This can be compared to the “buy the dips” technique
of the late 1990s. The unfortunate problem is that, in a bear market, this is a losing
philosophy. FastBreak now has the ability to force the optimizer to find a Short EMA
value that is, in fact, smaller than the Long EMA value. To force this condition check the
following option:
Options Screen
To bring up the next group of parameters screen use this icon:
This screen is mostly self-explanatory with the parameter choices discussed fully in the
standard manual. Again, check those options that you want FastBreak Pro to consider
during optimization:
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If you check the Correlation box, FastBreak Pro will try a maximum correlation, between
funds to hold, for some strategies:
The optimizer will try to find an optimum maximum correlation value along with an
optimum period to calculate the correlation values. The best strategies that are found
may or may not have the correlation option activated.
Exclude Money Market from Ranking has three choices:
You can force FastBreak to include or exclude the money market fund, or let FastBreak
Pro optimize the decision of determining if money market should be included or
excluded. We recommend the Optimize option.
To have the optimizer determine the Money Market Minimum Holding Period put a range
of (calendar) days in the following boxes:
To consider including the Harnsberger or POP options in your trading strategies, use the
check boxes. You will need to include a variable test range if you use the POP option.
To consider using the BOOM function use the following screen options:
This is a very powerful proprietary option available only in FastBreak Pro. The exact
process of how the option works is not fully disclosed at this time because of the
proprietary nature. BOOM often allows a strategy to purchase a fund much earlier in its
up-trend than would be captured by standard ranking methods. Note: The BOOM option
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will not work with all the ranking methods. See the Standard manual for a full
description.
You can force FastBreak Pro not to use the option, to use the option, or allow FastBreak
Pro to optimize whether to use the option. This option is very effective, and we
recommend that you check the Yes box to always use the option.
The Signal File is not an optimized option. If you select a signal file it is always used.
However, the Market Risk variable is optimized.
FastBreak Pro will try different percent risk values to meet your investment objectives. If
you know that you want to be 100% out of the market on a signal file sell, then put a
range of 0 to 0 in the risk text boxes. This will force strategies to always go to money
market on a signal sell. We recommend that you start with a range of 0 to 0. Note: If
you use a Market Risk other then zero (zero forces all positions to go 100% into money
market, i.e., zero risk) you must select an IS Start Date and OS Start Date that occurs
when your signal is on a Buy. This is because the optimizer assumes that the Balance
funds options are active. See Standard manual for additional details. If you don’t
follow this guidance, the performance values will be somewhat distorted. Also, see the
notes in the Standard manual regarding interpretation of Detail file results when the
Market Risk value is other than zero.
The brokerage STRF minimum holding period, Short Loss and Delay values are set to the
user defined values, and these parameters are described in the standard FastBreak manual.
To have the optimizer determine the number of funds to hold to meet your performance
parameters use the following:
In this example, the optimizer will determine if holding 1, 2, or 3 funds is best. If you
know you want to hold a specific number of funds, put that number in both range boxes.
Note: When optimizing for maximum return, the optimizer will often find strategies
that hold only one fund, or the minimum number of funds you allow. This may not be
the most robust system. See the Chapter on Building better Systems for more advice.
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The optimizer will determine the Top% value for your strategy using the range of values
in the following boxes:
In this example, a value between 10% and 50% will be optimized.
To use the Adjust Buy and Sell options check either the Yes or Optimize buttons in the
following screen:
If you use Yes, the optimizer will always try the adjustment option. If you check
Optimize, the optimizer will “consider” using this functionality.
See the standard manual for complete details on this option. If you decide to use the
function, you will need to input the Adjustment Index (the default is SP-CP, the S&P 500
Index) as well as ranges for the adjustment factors and the EMA ranges. Remember, an
adjustment factor less than 1.0 will decrease the parameter values, while adjustment
factors greater than 1.0 will increase those values.
Note: If you are using one or more of the curve fit ranking methods, a minimum of
two or three market days are required to calculate the curve fit. If the adjustment
factor to the Buy or Sell ranking period results in values less than three days,
FastBreak Pro will internally default to a minimum of three market days. For
example, if the Buy ranking period is four days but the adjustment factor is 0.25 this
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would result in only one day to calculate the curve fit. The curve fit equations require
up to three days to make the calculation, and FastBreak Pro will set the adjusted buy
ranking period to three days.
Note: If you use this option, the maximum adjustment factor can impact the IS start
date. For example, if you input a maximum Ranking value of 90 days and a maximum
adjustment factor of 2, then the IS start date will need to allow 180 days of data for the
initial ranking.
User Min Hold
It is recommended that when setting the User Min Hold maximum range value to span
“monthly” periods of time, i.e., 35, 65, 95 days. In other words, when setting the
maximum value it is better to choose 35 days rather than 28 days, or 65 days rather than
59 days. This is especially true for bond trading systems because bonds make monthly
distributions and it is important to capture the effects of these distributions. The values
are calendar days.
Use Log Trend Line
The FastBreak Pro optimizer can be used to optimize the nature of trendlines. It can also
be used to determine whether Linear or Logarithmic trendlines are best.
If the Yes option is chosen then only logarithmic trendlines will be used. This option
controls both the Stop and Buy Filter trendlines. In other words, you can’t mix
logarithmic and linear trendline options for Buy filters and sell Stops. If the No radio
button is chosen then only linear trendlines will be used.
If the Optimize option is selected then the optimizer will try both logarithmic and linear
trendlines to determine which works best.
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