EdgeWare FastBreak Standard User Manual Version 6.5

FastBreak

Version 6.x

Edge Ware, Inc.

www.edge-ware.com

Disclaimer and License Agreement

The information that FastBreak and FastBreak Pro provide is only part of the information
needed for a good investment program. Consult your investment representative before
buying or selling any fund or stock. 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 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, Microsoft 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 FastBreak Trading System..........................................13

5.0 Technical Support and Upgrades................................16

6.0 Installing FastBreak....................................................18

7.0 FastBreak Options and Functions...............................21

8.0 FastBreak Examples ...................................................64

9.0 Analyzing FastBreak Output ......................................68

10.0 Building Market Timing Signals ..............................73

11.0 FastBreak Calculation Details ..................................75

12.0 Suggestions on Improving Trading Strategies..........79

13.0 Trading using FastBreak...........................................80

14.0 Batch System Processing..........................................81

15.0 Frequently Asked Questions.....................................83

16.0 Resources..................................................................87

Appendix A - Technical Discussion.................................88

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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.

This manual supports both Standard FastBreak and FastBreak Pro. FastBreak Pro users
will see additional icons on the icon tool bar and two extra pull down menus. The addi­tional FastBreak Pro screens, and optimizer functionality activated by these icons, are
covered in the second manual that comes with the FastBreak Pro software. When we re­fer to FastBreak in this manual it will always apply to both Standard FastBreak and Fast­Break Pro unless otherwise noted. Also, when we refer to mutual funds in the manual
this will also apply to stocks unless otherwise noted.

Don’t let all the parameter boxes, icons, and fancy techno terms intimidate you. We can
tell you that if you read the manuals and run the examples provided you will quickly de­velop an appreciation for FastBreak.

Anyone who has attended a FastTrack user group meeting or conference knows that Fast­Track users span a very wide range of experience levels. Using FastBreak requires
knowledge of computers, investing terminology, FastTrack, as well as FastBreak. With
this variation in the audience knowledge base, it is always a struggle to know the right
amount of detail to address all these issues. We can never make the software and manual
simple enough for the new investor, and never add enough complexity for the “power
user.” We have put options in FastBreak 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 make is to start out activating all the options and
choosing the most complicated strategies. A considerable amount of error checking of
user inputs has been incorporated to make the software crash resistant, but it is possible to
get errors and crashes. 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.

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2.0 Introduction

An early version of 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.” The latest version of Fast-

Break you have in your hands is far more advanced than the version reviewed.

FastBreak is an investment tool that 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
to FastTrack and have the FastTrack software and databases installed prior to installing
FastBreak. Call Investors FastTrack at 800-749-1348 or visit their web site

www.fasttrack.net to subscribe. Do not call FastTrack for information relat-

ing to FastBreak. We have a good working relationship with FastTrack but we are

completely separate companies.

The authors of FastBreak have completed a large number of studies using the software
and you may ask, “Why not just make the results available?” The simple answer is that
our investment objectives and risk tolerance may not be the same as yours. Also, with the
evolution of market conditions and the availability of new mutual funds and the deletion
of old funds these strategies can become dated. We have built an easy to use tool that
will allow any user to back test and study trading strategies.

FastBreak has been used by hundreds of investors since 1996, and some of our best en­hancements have come from user suggestions. Thank you for your support, and we wish
you profitable trading.

Edge Ware, Inc

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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 ftbreak (ftbreakp for
Pro users), and find the file ftbreak.exe (ftbreakp.exe for Pro users). Rename this file
ftbreakVx.exe (ftbreakpVx.exe) where Vx represents your current version
(ftbreakV6.2.exe for example). Now put a shortcut to this file on your desk top.

We also recommend that if you are making a major upgrade, i.e. from Version 5 to Ver­sion 6, then install the new version in a new folder, e.g., ftbreak6 (ftbreakp6 for Pro us­ers). This will allow you to segregate your new files and systems that are associated with
this new major 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 for FastBreak Pro Version 6.5

Note: There was no Standard FastBreak Version 6.3 or Version 6.4. The FastBreak
Pro V6.3 releases only affected changes to FastBreak Pro. The change (Com­bine/Complementary Systems) in FastBreak Pro V6.4 was primarily a capability that is
useful for Pro users and we didn’t build a Standard V6.4. The changes in V6.5 affect
both Standard and Pro. We want to keep version numbers consistent when functional­ity affects both versions, which is the case for V6.5.

Combine/Complementary Systems

This was a capability added in V6.4 of FastBreak Pro but we are adding it as part of the
V6.5 Standard FastBreak upgrade; however, the full power of the capability can only be
realized in FastBreak Pro. In FastBreak Pro the optimizer will try to build a new system
to complement an existing system or two systems. In Standard FastBreak the capability
allows a user to combine a trading system in conjunction with one or two existing trading
systems and show the Summary results and FNU for the combined system. One purpose
of this capability is to build complementary systems that may reduce the MDD or volatil­ity of an entire portfolio that is trading multiple systems.

As an example, perhaps the investor has developed a system that trades ETFs. The an­nual return of this system may be excellent but has significant drawdowns on a regular
basis. This is often the case with a system that trades based on very long term trends

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without the benefit of tight stops. FastBreak now allows you to import the equity curve
(FNU file) from this existing system and combine it with a complementary system that
reduces the overall MDD when the two systems are traded together.

This functionality can also be used to combine FastBreak trading systems that comple­ment non-FastBreak trading systems.

Bug Fix and Better Error Checking on Early Start Date

V6.5 fixes a problem when the Correlation Check option is used. Sometimes the correla­tion check wasn’t properly being applied.

As more and more users use ETFs that have a limited price history that would result in
errors if a user selected a start date that is too early. We have made changes that will re­sult in fewer errors/crashes if an early start date is chosen. A user should still try to select
a start date that is relevant to the beginning of price data for funds in the trading family.

BOOM (Breakout Optimization Method) with Linear Slope Ranking

Long term FastBreak users are familiar with the BOOM option for ranking. Read the de­scription for the option later in the manual. We have made BOOM available to use with
the Linear Slope ranking method. In recent years we have found that Linear Slope is a
great ranking method for stocks and ETFs. This ranking method appears to help adjust
for the greater volatility of stocks/ETFs vs. the less volatile mutual funds so allowing
BOOM to be used with Linear Slope was a natural extension.

Buying Weakness and Selling Strength

FastBreak Pro V6.5 adds two new capabilities (RAT and BAT) for buying and selling
into what may be permanent or temporary strength. Some of the changes are intended to
build systems that are complementary to traditional FastBreak systems that always buy
into strength. This will become clear as each of the new options is explained. Note: The
new options will only work with Linear Slope ranking. We will give only a brief over­view here in the upgrade notes. More information can be found later in the manual

with calculation details in the Appendix.

RAT (Return Advance to Trend)

Typical FastBreak trading systems usually buy maximum price strength/momentum.
Trading systems can take a different approach and successfully take advantage of buying
temporary price weakness or selling into short term price strength. RAT is an option to
take advantage of these temporary moves. The assumption is that the move is temporary
and the price will revert to the trend.

BAT (Breakout Above Trend)

Sometimes a stock will have a good positive long term price trend, but for various rea­sons new buying will come into the stock and an even better trend will be established.
This is different from the BOOM option which tries to determine when a stock that has
been falling breaks out to the upside.

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Changes in Version 6.2

This section will cover enhancements in FastBreak Version 6.2 and is of interest to users
of previous versions of Standard FastBreak. Note: For users of previous versions of

FastBreak Pro see the Upgrade Notes in the supplemental FastBreak Pro manual.

Version 6.2 (V6.2) is the first release version of V6.X. It has exactly the same functional­ity of beta V6.1.

V6.1 of Standard FastBreak 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. Users of ver­sions prior to Version 6 will need to upgrade if they want to take advantage of any future
builds. Our policy is to provide technical support to the most two recent versions, e.g.,
V5.X and V6.X.

Note: There wasn’t a V6.0 of Standard FastBreak.

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
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.

Adding trendlines to the Buy Filter and Stops required changes in the layout to three tabs:
Strategy, Stop Loss, and Buy Filter tabs, but you should quickly become comfortable with
the new layout.

Details of the Trendline algorithm are provided in the Appendix A.

NOTE: The algorithm to determine trendlines is very computer time intensive. If you
are using a very large trading family you will notice a long delay to evaluate the strat­egy. More about this in the Appendix A discussion.

Changes in Version 5

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This section will cover enhancements in FastBreak Version 5 and is of interest to users of
previous versions of Standard FastBreak. Note: For users of previous versions of Fast-

Break Pro see the Upgrade Notes in the supplemental FastBreak Pro manual.

You may ask how Version 5 of Standard FastBreak 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 user. The following list of changes covers upgrades from Version 4 to Version 5.
Some users may be upgrading from a very old version and a section follows to cover up­grades from Version 2. Note: There wasn’t a Version 3 of Standard FastBreak.

Changes between Version 4 and Version 5

 Capability to build market timing systems and signal files.

o We believe this is the most exciting new functionality. 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 devel-

oped 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 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 sys-

tem, 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.

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 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.

 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.

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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 2 and Version 5

Note: You can load trading systems developed with Version 2 of FastBreak into this
new version, however, the first time you load an old trading system 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.

 Load all three FastTrack databases at the same time
 Batch mode
 Alpha ranking
 Breakout Optimization Method (BOOM)
 Better Opportunity Sell Signal (BOSS)
 RSI stop
 Numerous buy filters: EMA, parabolic, RSI, beta, and correlation
 New information in summary and detail files
 Enhancements to adjustment factor options

Because of changes in program calculation logic you may see changes in results from
your trading systems developed with prior versions of FastBreak. This is why we rec-

11

ommend you keep the old version of FastBreak on your computer until you verify your
systems haven’t changed. Here are just a few reasons why strategies my give different
results with the new version:

 In previous versions of Standard FastBreak if a stop was hit, but the fund hitting the

stop was still the top ranked fund, the detail file would show the fund being sold and
then repurchased. New logic always checks to determine if the fund being purchased
was the one just sold. If that is the case the sell is negated.

 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 for this stop to verify that it exceeds the stop parameters specified.

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4.0 FastBreak Trading System

FastBreak uses a trading system method that buys mutual funds showing strong relative
trends in price and sells funds that are showing poor relative trends in price. You may
hear traders refer to this type of trading system using many names: market sector upgrad­ing, momentum investing, trend following, fund ranking, and relative strength trading.
We will take a quick look at each of these concepts, because there are small differences,
and explain how FastBreak works.

Market Sector Upgrading (MSU) The simple explanation of MSU is moving your in­vestment out of a sector of the market that is showing poor relative strength and into a
sector of the market that is showing the best or better relative strength. For purposes of
this discussion, the word “sector” refers to industry groups that make up the market, for
example, health care, transportation, technology, etc. An example of MSU would be a
move from the energy sector into the health care sector if health care funds are showing
better price strength relative to energy funds.

MSU tends to be a fully invested trading strategy that relies on being in the strongest sec­tor of the market for good performance rather than using market timing. However, in
bear markets, money market funds can be a considered a strong sector for investing.

Many investors using MSU use the Fidelity Investments Select Funds, but there are other
mutual funds offered that concentrate on a narrow sector of the market, for example, Ry­dex and ProFunds have a large number of sector funds.

Why do different sectors of the market rotate in and out of favor? There is probably no
single answer to this question. Some of the rotation may be due to the economic cycle
(The All Season Investor by Martin J. Pring is an excellent book on this subject) or presi­dential election cycle. Political climate can be another influence. Health care funds were
impacted in 1993 with the debate on a national health care plan but bounced back with
excellent gains in 1994 and 1995 when that plan was abandoned.

Momentum Investing Momentum investing (not to be confused with earnings momen­tum) buys funds showing a surge in price with the thought that the price will continue to
move upward. This system is not limited to any particular type of fund.

Trend Following Trend following systems rely on longer term, major up trends in price.
Trend following systems usually don’t get in at the start of a major up trend or get out at
the top of an up trend. The system usually waits until an up trend is firmly established be­fore purchasing a fund and often waits until the trend is clearly ended before selling. The
system is not limited to any particular type of fund.

Relative Strength Trading and Ranking Strategies Trading systems based on relative
strength or ranking are very similar. Relative strength usually compares the price action

13

of a fund to an index and buys the fund that is showing the strongest strength compared to
the index. Ranking strategies compare the price action of a fund to a group or “family” of
other funds. The fund showing the greatest percentage change in price is purchased.

There are obvious similarities in all these systems. FastBreak uses the Ranking method to
select the funds to buy and sell. The how or why a sector or fund is rotating in or out of
favor is not as important as making an accurate determination that the rotation is happen­ing, and the trend will continue long enough so that the movement is tradable.

There are many good technical tools available to help determine when the trend has
changed, such as trend line analysis, RSI, moving averages and AccuTrack. Some tech­niques only help predict a trend for a specific fund that may be changing: trend line analy­sis and moving averages are examples. Other tools and indicators not only give buy and
sell indications but can show relative strength between different funds, AccuTrack for
example.

No technical analysis technique is perfect. Many techniques require the user to “interpret”
or make a value judgment. Others require considerable amounts of time to calculate or
evaluate changing trends. Finally, if many different funds give a buy signal, there is al­ways the question of which funds should be purchased for the best return?

Many FastTrack users have been using “fund ranking” to determine the particular fund to
buy or sell, and this is the system FastBreak uses. Fund ranking is a very simple concept
to explain, but refer to the FastTrack manual for a complete description. First, the inves­tor makes a family of the funds under consideration for trading. The family is then
“ranked” for gain over a given period (15 market days for example) using the blue pole
and the “Rank” command. The funds are listed using the “List” command. The investor
typically sells a fund that has dropped out of some predetermined top percent of the
ranked funds (50% is common). The investor then buys the top “ranked” fund. As an
example, if the investor makes a 15 day rank on 20 sector funds, and the fund being held
is more than 10 places down on the ranked list the fund is sold and the money rolled into
the first fund on the ranked list. The following table is used to illustrate the example.
The table is a 15 market day FastTrack rank list. Assume this list contains all the funds in
the trading family. Any fund below FSVLX on the list would be sold. The fund to pur­chase is FSELX.

SELECT Family Ranked from 01/10/96 to 01/31/96 ending 01/31/96

No Symbol Fund Name Gain

---- ----- ------------------------------- ---- ---- ---- ---- -----­1 FSELX Fidelity Sel Electronics/008 13.8
2 FSPTX Fidelity Sel Technology/064 10.0
3 FDCPX Fidelity Sel Computers/007 9.7
4 FIDSX Fidelity Sel Financial Svc/066 9.6
5 FSLBX Fidelity Sel Broker & Inv/068 9.6
6 FSRBX Fidelity Sel Regional Bank/507 9.0

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7 FBIOX Fidelity Sel Biotechnology/042 8.5
8 FSCPX Fidelity Sel Consumer Prod/517 8.4
9 FSCSX Fidelity Sel Software-Comp/028 8.2

10 FSVLX Fidelity Sel Home Finance/098 7.3
11 FSHCX Fidelity Sel Medical/505 7.0
12 FSCGX Fidelity Sel Indus Equip/510 6.7
13 FDFAX Fidelity Sel Food & Agric/009 6.6
14 FSPHX Fidelity Sel Health Care/063 6.6
15 FSPCX Fidelity Sel Insurance/045 5.9
16 FSDCX Fidelity Sel Develop Comm/518 5.8
17 FSPFX Fidelity Sel Paper & Forest/50 5.1
18 FSDAX Fidelity Sel Defens & Aero/067 4.8
19 FSCHX Fidelity Sel Chemicals/069 4.7
20 FSDPX Fidelity Sel Indus Material/50 4.6

This is a simple concept; however, there are many questions an investor could ask. It was
these questions that lead to developing FastBreak. The following list has a few of the
questions FastBreak allows the user to run historical analysis on:

What if the buy ranking period is different from the sell ranking period?

What if the fund has a minimum holding period to avoid transaction fees?

What if a strategy has a stop loss, even if there is a transaction fee?

What if more than one fund is held?

What if there is a change in the point a fund drops in the ranked list before it is sold, i.e.

top 50%, 30%, 20%....?

What has been the historical maximum draw down for a strategy?

What are the Ulcer Index and Ulcer Performance Index for a strategy?

What happens to the historical performance if funds are added or removed from a trading
family?

What if I want to add a fund or stock into my strategy using the FastTrack FNU file for­mat?

What if I use a market timing signal in my strategy?

Warning, back testing is no guarantee of future results, but it can provide
very useful information when developing trading systems.

15

5.0 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 contacting 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 typically provided by email. You will usually receive a response
within 24 hours.

We can be contacted at [e-mail]. 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 $50 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
 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

16

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 along with release notes.

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. 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.

17

6.0 Installing FastBreak

Note: If you computer doesn’t have a CD drive you can still install FastBreak. If you can
get access to a computer with a CD drive then copy all the installation files on the CD to a
memory card. Load the files on the new computer into a temporary folder. C

To install FastBreak:

Note: Windows 7 Installation Note – During installation on a computer with Windows
7 you may get an error during installation (the error may mention mcf40.dll) If this
occurs, click Ignore and the installation will complete properly.

1) Stop any application that may be running. Note: We have had a number of users call

with installation problems because Microsoft Office was running in the background.

2) Insert the installation CD and double click the SETUP.EXE file to start the installation.

(Note, there are other “Setup” files on the CD so be sure to click only the SETUP.EXE
file)

3) The first screen you will see is:

This is a warning to close any applications you may have running. The various versions
of Windows have different methods for determining applications that are running. Con­sult your Windows manual to determine how your version works. If you don’t have ap­plications running select OK otherwise, exit Setup and close the applications.

18

4) The second screen you will see is:

The setup program is asking the name of the drive and directory where FastBreak is to be
installed. The default is C:\FTBREAK (FTBREAKP for Pro), and we suggest that you
use the default directory name. If the default is acceptable click on the button that resem­bles a computer.

5) If you need to change the drive letter or directory path click the Change Directory but-

ton and the following screen will appear:

This screen allows you to change the drive and/or the path and directory. If you need to
change the drive, click on the Drives pull down arrow button to get a list of your drives to
select from. Once you have selected a drive, click on the drive folder to see a list of exist­ing directories for installation or type a directory name in the Path box, then click the OK
button.

6) A FastBreak icon will be created in your Windows Programs environment.

19

Reinstalling FastBreak

Note: Windows 7 Installation Note – During installation on a computer with Windows
7 you may get an error during installation (the error may mention mcf40.dll) If this
occurs, click Ignore and the installation will complete properly.

Reinstalling FastBreak is our number one tech support problem. Users crash hard drives,
buy new computers, new laptops, etc. 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
 Verify that the FastTrack account number on this computer matches the account num-

ber on the FastBreak CD

 Install FastBreak using the installation CD
 Go to our web site and download the latest upgrade, if one exists

20

7.0 FastBreak Options and Functions

FastBreak is run from the Windows environment, and your installation should have cre­ated an icon when you click on the Windows Start button and go to Programs. If you
want to put an icon on your Windows desktop find the ftbreak.exe (ftbreakp.exe for Pro)
and put a shortcut to this file on your desktop. Refer to your Windows manual for guid­ance on how to do this. Click the icon as you would to launch any application. The first
time FastBreak is run, it will check your C: drive for the FastTrack database. If the data
is not found, a window is displayed that lets you pick the drive and directory where the
FastTrack data is located. See the installation chapter for details on how to complete in­stallation.

When FastBreak is launched the main menu will appear:

Note: All the full screen prints in this manual are from FastBreak Pro. Standard
FastBreak will not have the following icons and pull down menus (Pro Functions and
Graph). This manual will only address functions common to both Standard FastBreak
and FastBreak Pro. These icons and menus control functionality unique to FastBreak
Pro:

21

When FastBreak is launched, it will read all the family names in your FastTrack directo­ries (Ft\Ftdef, Ft\Userdef, and Ft\Ft4win\Sftdef), including user created families, and load
all the fund names including your FNU files. If FastBreak hits an error during the load­ing of your FNU files this indicates you have a corrupt FNU file. You will need to move
all your FNU files from your FastTrack (FT) folder to a temporary location. Now, try to
restart FastBreak. If FastBreak launches you will need to determine which of your FNU
files is corrupted. This can be done by moving the files one at a time from the temporary
location and launching FastBreak after each transfer.

The menu may initially look very complicated but is quite logical and user friendly. We
will step through each menu item and describe each feature. FastBreak uses the very
common Windows Tab and Tool Bar method of presenting functions and data.

Funds/Index Tab

When FastBreak launches the Funds/Index Tab is on top. See the previous page. This
screen is used to select your Trading Family and Money Market Fund to use in the trading
strategy.

Selecting your strategy trading family

FastBreak allows selection of a prebuilt family of funds, either a family built by Fast­Track or user-built family. See your FastTrack manual on how to build a trading family.
All the available families will be shown in the top Families available for selection box.

Put the cursor in the empty line just above the first family name and start to type the name
of the family to be traded. FastBreak will find the family as the name is typed. Note:

The indexing may have problems if you have family names starting with unusual

22

characters such as ~,@ etc. You can also use the slider bar to the right of the family
names to find the family of interest. Once the family is located, use the cursor and left
mouse button to click the family. It will highlight as in the above screen. Note: The

highlighted family will NOT appear in the box where you started to type the name.

Note: FastBreak will read all your FNU files. When these files are made part of your
trading family, FastBreak will include them in the trading strategy. See the FastTrack
manual for information on FNU files.

Money Market Fund Selection

Next, select a money market fund from the list of fund names just to the right of the
“Money Market Fund” label. Any fund, stock or FNU file can be selected as a money
market fund and the selection is made in the same way families and funds are selected.

Notes: When selecting a money market fund make certain the fund is available the en­tire time period you are planning to test. FastBreak will give you a warning notice if
the fund doesn’t span the testing period. When building trading families in FastTrack,
do not put your money market into the trading family.

Exclude Money Market from Ranking

Many users only want to go into the designated money market fund when using a market
timing signal file. Clicking this option will prevent the money market fund from being
selected as part of the ranking strategy, but on a signal file “sell” the money market will
be used. Note: Even if you use this option you may sometimes find that FastBreak has

purchased the money market fund even when not on a signal file sell. If FastBreak is
trying to purchase a fund but none of the funds in your trading family meet your buy­ing criteria, then money market will be purchased as a last resort. For example, per­haps you are using the Exponential Moving Average buy filter, but all the funds are
below the specified moving average, FastBreak will purchase the money market fund
as a last resort.

Money Market Minimum Hold

23

If using money market in a ranking strategy, this menu item will allow you set a mini­mum holding period for the money market fund before it can be sold. Many users like to
set this to a short value because money market funds usually do not have a minimum hold
period or short term trading fees. If you use a substitute fund in place of a money market
fund, remember that FastBreak does not apply any short term trading fees to the money
market. Note: The period is in calendar days not market days.

Maximum Correlation Check

This option allows a strategy to avoid buying and holding similar funds at the same time.
If the correlation option is checked, the fund under consideration for purchase will be
compared in correlation to the other funds currently held by the strategy. If the fund un­der consideration is correlated greater than the specified value, then the fund will be re­jected for purchase and the next highest ranked fund will be considered. The correlation
is calculated over a user defined period. We recommend that at least 50 trading days be
used for the calculation. Correlation can range from -1.0, negative correlation, to perfect
correlation of 1.0 Note: Many funds will become highly correlated over short periods

even though they may have low correlation over long time periods. For this reason the
correlation value should be set to a high value. A reasonable maximum correlation
value would be 0.9 or higher.

Statistics Index and Period

FastBreak calculates a variety of statistics on your trading system, including Beta and
Correlation. These statistics will be covered in the Output section of the manual. To cal­culate some of these statistics, FastTrack requires an index to be specified. The default
index is the S&P 500 index (SP-CP in the FastTrack database). If you want statistics cal­culated using a different index, you must specify the FastTrack symbol here. A period, in
market days, is required for the calculation. The default is 50 days. We don’t recom­mend periods shorter than 50 days, but longer periods are certainly reasonable. Finally,
the user has a choice of calculating the beta using correlation, which is the traditional
method, or without correlation. When choosing Without Correlation, the beta calculated
isn’t actually beta, but is the ratio of the equity curve daily standard deviation and the in­dex daily standard deviation.

24

Strategy Tab

Next, click on the Strategy Tab to bring up the following screen:

This is the most complicated menu screen in FastBreak. This tab sets up the majority of
the trading strategy parameters.

Buy and Sell Strategy

This may be the most difficult part of FastBreak to understand. The “Buy and sell strat­egy” menu is a pull down menu. Click the down arrow button just to the right of the box
below the line that reads “Buy and sell strategy” to see all the trading options available.

Each choice is described below:

25

Buy and sell using rank - This is the most often used strategy. A simple FastTrack type
ranking is made on the funds in the selected family. The ranking produces a list of funds
in order of decreasing gain over some specified time period. This is equivalent to using
the blue pole and rank function in FastTrack. FastBreak will “buy” a fund if it is the top
ranked fund and will “sell” a held fund if it drops out of the top part of the family of
funds during a ranking.

Buy using rank and sell using slope - FastBreak will “buy” using a simple ranking but
“sell” if the slope of a “normalized” price chart for a held fund drops in relation to the
slope for all the other funds in the family. This is more fully explained in Appendix A.
The slope can be calculated using a variety of curve fit methods that will be selected us­ing a soon to be described selection menu. Using a curve fit of the daily price data will
smooth the data and tend to filter out short term price volatility. The number of daily
price points used to determine the slope is set by a parameter to be described later.

Buy using slope and sell using slope - This is similar to the above strategy except the
strategy does a curve fit on the daily price data for each fund in determining “buying” and
“selling” funds.

AccuTrack buy and AccuTrack sell - This is the most difficult strategy to understand
and is one the slowest from a computer run time prospective. The user may want to own
a very fast computer before using this strategy! Some users have referred to this as an
“AccuTrack Bubble Sort.” The AccuTrack indicator should be familiar to all FastTrack
users and is described in the FastTrack manual. It is an indicator that can be used to find
the relative strength between two funds. Typically, one of the funds is made the Ac­cuTrack index. FastBreak will select two of the funds in your family making one the
“fund” and the other the “index.” Next, a determination is made on which is the stronger
fund based on the AccuTrack value. If the value is greater than 50, the fund is stronger.
If the AccuTrack value is less than 50 the index is the strongest. If the “fund” is stronger,
FastBreak will make it the new index and go to the next fund in your family to repeat the
calculation. This is done for all the funds in the trading family. The fund that is in the
“index” position at the end is considered the strongest fund. The process is repeated over
again and again for the remaining funds. The funds are ranked by this technique from
strongest to weakest. Selecting this strategy option will cause a change in some of the
other screen options. AccuTrack trading parameters will replace the ranking buy and sell
ranking parameters. This will be explained later in this chapter.

Buy & Sell: Long Gain * Short Gain - This option combines a long ranking period gain
with a short ranking period gain by multiplying them together. This method will give
weight to both long term price performance and short term price performance. For exam­ple, if testing a long period of 40 market days and a short period of 5 market days the pro­gram will first take the ratio of the NAV of the fund today and 40 days ago. Next, the
ratio of the NAV of the fund today and 5 days ago is calculated. The final step is to mul­tiply these two ratios together. Putting numbers to this example - we will assume a fund
has a current NAV of $18.00, a $17.75 NAV five days ago, and a $17.45 NAV forty days

26

ago. The long period NAV ratio is: 18.00/17.45=1.0315, and the short period NAV ratio
is: 18.00/17.75=1.014. Multiplying these two ratios together: 1.0315 X 1.014= 1.046.
This is done for each fund, and the multiplied ratio results are used to do a ranking with
the fund having the largest value as the #1 fund.

When this option is selected four new boxes appear on the screen, Min Long, Max Long,
Min Short, and Max Short. This allows a range of long and short combinations to be
tested. This will be explained shortly.

Buy & Sell: Long Rank * Short Rank - This option also combines long and short term
price performance to rank funds. A ranking of the family is made over a long look-back
period and then a second ranking is made over a short look-back period. The actual rank­ing positions are multiplied together, and this final result is used to make a third and final
ranking. For example, a fund may be ranked number 5 in the trading family over the past
40 market days and ranked number 8 over the past 5 market days. The result of multiply­ing these two ranking positions together is: 5 X 8 = 40. As you can see, the lower the
ranking value the smaller the final result, therefore, when the third and final ranking is
performed on this multiplication of two ranking periods the fund with the LOWEST
value is ranked number one.

When this option is selected four new boxes appear on the screen, Min Long, Max Long,
Min Short, and Max Short. This allows a range of long and short combinations to be
tested.

Buy & Sell: Buy and Sell using UPI – Calculation of Ulcer Performance Index (UPI) is
explained in the Appendix. Choosing this option ranks funds based on a short term UPI
value. This usually results in buying funds that have a smoother equity curve

Buy & Sell: Short EMA/Long EMA - This option creates a ratio of the Short Exponen­tial Moving Average (EMA) divided by a Long EMA. If a fund is starting to move up,
the short EMA will be a larger number than the long EMA. The ratio for all the funds is
then ranked from largest to smallest. When a fund starts to turn down the ratio will be­come smaller.

Buy & Sell: General Anchored Momentum - This option is based on work by Rudy
Stefenel and published in Technical Analysis of Stocks & Commodities. See Appendix A
for a detailed description.

Buy & Sell: Most Anchored Momentum - This option is based on work by Rudy Ste­fenel and published in Technical Analysis of Stocks & Commodities. See Appendix A for
a detailed description.

Buy & Sell Using Alpha Ranking – This option ranks funds based on short term “al­pha.” See Appendix A for a detailed description of alpha.

27

Buy and Sell using Sharpe Ratio – This option ranks funds based on short term Sharpe
Ratio. Sharpe Ratio is a common measure of reward and risk. See FastTrack Help for a
description of Sharpe Ratio.

Buy Slope Type/Sell Slope Type

This button selection menu is used to select the type of slope to use when using a curve fit
strategy. Linear, Power (shown as Non-linear) or Quadratic curve fits can be used. Note,
when a strategy is selected that does not use a curve fit this menu “grays out” and pre­vents selection. If using a curve fit for buying and selling, different types of curve fits can
be selected. See the Appendix A for a description of each type of curve fit.

Start date

This is the date when FastBreak will start testing a strategy. Note: FastBreak uses 8 dig­its for dates. You must include all four digits in a year, and if a month or day is only
one digit (1-9) you must include a zero in front of the digit. One of the most common
mistakes that will result in run errors is not entering dates correctly. Note: FastBreak
will not let you set a date earlier than the first date data is available in the FastTrack
data base (typically 09/01/1988). Also, because ranking strategies are being used, you

must have data available for ranking proceeding the start date. FastBreak will default to a
start date that allows the number of days required for the maximum ranking period that is
expected in the strategy to be tested. For example, if a maximum ranking period of 50
days is to be tested, FastBreak will verify that there are 50 days of data preceding the Start
Date in the FastTrack data base. If you try to violate these rules FastBreak will “beep” at
you. Note: FastBreak does the same error check for other options, including stops and

filters that require a “period” of data. For example, if using the maximum correlation
check with a period of 100 trading days, then the start date will be adjusted to allow
100 days of data prior to the start date. It is important not to override the FastBreak
default date.

End date

This is the date FastBreak will use to end the testing. The default is the last day in the
FastTrack database.

Use Harnsberger Option

28

The Harnsberger Option invokes a strategy developed in cooperation with Fritz Harns­berger, a money manager in Santa Barbara (see Resource chapter). Mr. Harnsberger
noted that the standard FastBreak ranking system is a “sell based” system in that it will
not buy a new fund until a currently held fund drops in relative strength and generates a
sell. Often there may be a fund or funds that are doing extremely well on the buy ranking
but can’t be purchased until a fund is sold.

The Harnsberger Strategy is a “buy based” system in that when a fund not held is highly
buy ranked, it is purchased and replaces the weakest fund held. The advantage of this
method is that a new fund leader is purchased as soon as possible.

Please see the chapter on FastBreak Calculation Details for additional details on the
Harnsberger Strategy.

Use POP (Persistence of Price)

Selecting this box activates the Persistence of Price function. See Appendix A for a com­plete description of how this function works.

Note: POP will work only with certain ranking options. See the table at the end of this
chapter. You may want to consider excluding Money Market from ranking when us­ing this option because the option will have a tendency to purchase the money market
very often (money market funds never have drawdowns). However, for a more conser­vative strategy, leave the Money Market in the ranking.

Use Short Trading

Selecting this box activates short trading functionality. Some mutual funds, and stocks,
can be “sold short” and this option allows strategies to be tested that use relative strength
as a buy and sell criteria for short selling. In this case, the fund to be sold short is the one
showing the weakest relative strength. The short position is ended when the fund has
good relative strength compared to the other funds in the trading family.

When this option is selected, FastBreak creates an “inverse” fund for each fund in the
trading family. For example, if the real fund is down 2% one day, the inverse fund is up
2%. This inverse relationship is calculated for each day in the data base. All perform­ance data will be created with the assumption that a “short position” is held in the fund.

Set sell rank = buy rank

If this box is checked the number of days used for a buy ranking period is also used for
the sell rank period. Notice that when this box is selected the “Sell min” and “Sell max”
selection boxes are not available because they become meaningless.

29

Breakout Optimization Method (BOOM)

This is a very powerful proprietary option available only in FastBreak. 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 an up-trend
breakout than would be captured by standard ranking methods. Note: The BOOM option

will not work with all ranking strategies. See the table at the end of this chapter.

This option is very effective and we recommend that you consider testing with the option.
There are three parameters required. From left to right we will call them Parameter 1, 2
and 3. Note: This option was designed with the intention that the optimizer in Fast-

Break Pro would find optimum parameter values. The method used in BOOM has lit­tle intuitive meaning, and suggesting reasonable values without the benefit of the opti­mizer in FastBreak Pro is very difficult. Here are some suggestions. Value for Parame-

ter 1 is 30, Parameter 2 is 5 and Parameter 3 is 1. If you find that a trading system is buy­ing a fund too early on a breakout and you are buying too many false rallies, consider in­creasing Parameter 2. If rallies are purchased too late then consider decreasing Parameter

2.

Breakout Above Trend (BAT)

Sometimes a stock (or fund) will have a good positive long term price trend, but for vari­ous reasons new buying will come into the stock and an even better trend will be estab­lished. This is different from the BOOM option which tries to determine when a stock
that has been falling breaks out to the upside. The parameters used by BAT are very
similar to the way BOOM works. Note: This option was designed with the intention

that the optimizer in FastBreak Pro would find optimum parameter values. The
method used in BAT has little intuitive meaning, and suggesting reasonable values
without the benefit of the optimizer in FastBreak Pro is very difficult. See the guidance
for choosing parameters in the BOOM description above. Please refer to Appendix A

to see a much fuller explanation of how the BAT function works along with graphical
examples. The Appendix also explains how BAT can work in conjunction with Return
Advance to Trend (RAT).

Note: BAT (and RAT) will only work with Linear Slope ranking. See Appendix for ex­planation. Also, BAT will not work with the ranking Adjust option. Both of these op­tions adjust the ranking periods and if you try to use them together they will conflict.

Return Advance to Trend (RAT)

30