EdgeWare FastBreak Pro Version 6.2 - Manual (Page 70)

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It can be argued which of the ten systems would have been chosen to be traded. The out-
of-sample MDD was very similar in all cases. In this particular instance, the best OS
strategy, system 9, also happened to be the best Post period case at 45.8%/year. We
would like to say this always happens, but that is not the case. The second best case,
system 10, had a significantly lower but still impressive return, and the worst OS case,
system 3, had a very respectable Post period performance of 32.2% As you can see, this
is not an exact science and is further evidence you should always be trading a variety of
trading systems. Trading systems run hot and cold, and you can obtain more consistent
returns by trading multiple systems.
You may observe that, on average, the S&P 500 beat our systems in the OS period. This
is not too surprising in that the large capitalization stocks did very well, and there were no
significant market corrections. However, in the Post period, the market was very volatile,
and our systems were superior.
Note: Generation 14 was our second choice because it had nearly the same OS return
as generation 6, but had a much lower standard deviation on the systems. Although
the best system in generation 14 was not as good as the best in generation 6, the worst
system was much better. Here are the results using the FNU curves: OS Average =
34.6%/year, Post OS return = 33.3%/year.
Looking at Equity Curves
There is an issue with strategies that hold multiple funds that you should be aware of.
When FastBreak evaluates a specific trading system holding multiple funds, it invests all
positions on the first date of the evaluation period.
This is not the way you would
typically enter a new trading system, i.e., you would gradually enter new positions as new
trades happen. This can distort the performance over short time periods, but the effect
dampens with longer time periods. You can reduce the effect by running a system over
the entire FastTrack database time period and then look at the equity curve (FNU file)
that FastBreak can output.
The FNU file can be imported into FastTrack, where
performance can be measured between any two dates. Here is an example that uses the
results from the previous example and shows the performance difference: