EdgeWare FastBreak Standard Version 5 - Manual (Page 38)

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Trailing Loss %
This is the maximum draw down an investor is willing to accept on any trade. The loss is
calculated based on maximum NAV after a fund purchase. For example, if the user sets
this value to 12%, and a fund is purchased for a NAV of $8.00 and later rises to a maxi-
mum value of $13.00, the fund will be sold if the NAV drops below $11.44 ($13.00-
$11.44)/$13.00 = 12%). Setting this parameter to a typical value of 5% to 15% in a trad-
ing system will often decrease total return performance but may provide a trading system
with less volatility.
Note: In real life, there is no way to prevent a fund from loosing more than a defined
Loss % because a fund is priced, at best, on an hourly basis and, more typically, a daily
basis. This parameter will result in giving a sell signal once “Loss %” has been vio-
lated.
If you want to use both time intervals the screen would resemble the following:
In this example, the trailing stop will be 10% for the first 30 days the fund is held and 6%
thereafter.
If you wanted a strategy that used 9% for the entire time the fund is held, the screen
would resemble the following:
Note: A stop doesn’t need to start on the first day purchased. For example, if you want
a 10% trailing stop to be effective starting on day 30 and then be permanently effective
the screen would look like the following: