EdgeWare FastBreak Standard Version 6.5 - Manual (Page 99)

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Investment objectives will help define how trendlines are drawn. For example, if a pri-
mary objective is to avoid large equity draw-downs then trendlines that capture smaller
price moves and avoid significant sell offs will be a reasonable choice. However, it is
often the case that to maximize return at the expense of large draw-downs requires trend-
lines that capture larger price moves and are drawn using more significant price low
points. The algorithm used in FastBreak allows either choice to be made.
Finally, trendlines can be drawn using linear price data or using logarithmic price data.
There are advantages and disadvantages to both methods. FastBreak will allow either
method to be used.
Using Trendlines in FastBreak
An option on the Strategy Tab can force use of a logarithmic trendline.
If the Use Log Trendline option is checked, then logarithmic trendlines will be used for
both the Trendline Stop and Trendline Buy Filter. If it isn’t checked then linear (arithme-
tic) trendlines are used.
Trendline Stop
The above boxes have been added to the Stop Tab to activate the trendline Stop. The op-
tion is used just like the other Stop options. That is to say, check the box to activate the
trendline Stop as either a singe period Stop or a two period Stop.
The Size text box is used to control the significance of the price dips used to draw the
trendline. If a small value is used then smaller price dips will be considered significant
and shorter term trendlines will be drawn. If larger values are used then larger price dips
are required before they are determined to be significant enough to anchor the trendline
and the trendlines will capture longer term trends.
In the above example a value of 9 is used to control the trendline for the first 30 days.
Starting on day 31 a value of 5 is used which will tend to use small price dips, and there-
fore, shorter trends. Reasonable values are 0 to 15.
If a position is stopped out due to a trendline being violated then a “T” is placed in the
WHY column of the output Detail Tab.
Trendline Buy Filter