EdgeWare FastBreak Pro Version 6.2 - Manual (Page 12)

12
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