EdgeWare FastBreak Pro Version 6.5 - Manual (Page 64)

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Example 4 – Building Market Timing Signal Files
Read the chapter on building market timing signals in the Standard FastBreak manual.
That chapter will provide background on the logic of how FastBreak builds signal files.
FastBreak Pro can be used to optimize and build market timing signals. This example
will demonstrate how to build a multi-market timing signal. The object of this example is
to build a market timing signal that can be used for stock and mutual fund trading
systems. The object is a signal that trades infrequently and stays in the market when at
lest one of three major market indexes (S&P 500, Russell 2000, NASDAQ 100) is doing
well. Many other market timing signals that are available trade or are based on a single
index. Market indexes move together the majority of the time, however, there are times
when they become divergent. It was our desire to stay in the market and let the FastBreak
rotation strategy (using this signal) rotate us into the correct fund or stock and only leave
the market when everything was doing poorly.
We built a trading family containing SP-CP, RUT-I, and NDX-X and called it
MYINDEX3.FAM. Locate MYINDEX3.FAM on the installation CD. Move this family
to the USERDEF folder located in your FastTrack (FT) folder. Now, launch FastBreak
Pro. Note: You must put the family into the USERDEF folder prior to launching
FastBreak. Next, locate the file Example4.GPF on installation CD and load it. If you
have copied the examples to your hard drive, then locate the GPF file there.
The goal is a signal with less than 6 switches per year and a 20% MDD. This MDD may
seem high, but we have found that we can use a signal with a large MDD but then build a
trading system in FastBreak Pro that uses that signal and keeps the overall strategy under
15%. The reason for not using a “perfect” signal is that we have found that if a perfect
signal is used in developing a FastBreak Pro strategy then individual stops for the funds
or stocks will not be selected by the optimizer. We believe it is always a prudent plan to
have at least one stop active. Using a less than perfect signal, stops become active and
serve as a good backup to get out of a bad or declining trade position.
After the GPF file has been loaded, click the optimizer execution button. The
optimization process is the same as developing a normal trading system. When the
optimization is complete, look at the Out of Sample results screen to choose the best
generation.
Save the best 10 systems from the best generation using the methods
demonstrated earlier. You can then load and examine each of the 10 best systems to do a
final selection. The selection may be base on switches per year, UPI, MDD etc.
After the final selection of a “best” system is determined, that DFT file is loaded into
FastBreak. Now, go to the Output Files Tab and select Make Signal File. This will
present you with screens to name and describe the signal file. Finally, save the DFT with
a unique name. You can then execute FastBreak and it will build the signal file and place
it in the FT SIG folder. You can load this signal file into FastTrack just as you would any
signal file. You can also use the signal file in FastBreak to build better trading systems.