EdgeWare FastBreak Pro Version 5 - Manual (Page 62)

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0 37.7
6 40.7
18 41.8
These results are very encouraging because all systems are comparable and the “older”
systems actually have slightly better performance. The results would encourage us to
trade systems for a year or more prior to re-optimization. See the Frequently Asked
Questions chapter for additional comments on this subject.
Are Sector Funds Getting Harder to Trade?
While doing studies with Fidelity Select funds, we noticed that it has become more
difficult in recent years to trade these funds. We wanted to determine if trading system
“out-performance” was similar year to year. Out-Performance is the benefit of a trading
system over buying and holding (B&H) all members of the Select family. In other
words, if you put an equal amount of cash in each of the select funds, you would have a
given return. Now, optimize a trading system for that same year (this is the most
optimistic return an investor could expect) and how would the return compare? If the
optimized return is twice as good, that would be a Trade Return/B&H (out-performance)
ratio of 2.
We used the out-performance ratio rather than absolute return as the performance
measure because the intent of a good trading system is to out perform B&H. In a very
good or very poor market, using absolute return could be misleading. For completeness,
here are the B&H returns, average of the Select family, for the June-June periods:
Date End B&H, %
1990 12.3
1991 13.3
1992 16.5
1993 20.1
1994 11.6
1995 17.9
1996 30.2
1997 18.4
1998 27.2
1999 17.3
We did a simple study that looked at trading systems in 12 month increments. The start
and end date was the first trading day of June for each year. All systems held 3 funds and
optimized for a 15% MDD. Below are the results from the study: