EdgeWare FastBreak Standard Version 5 User Manual
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Parabolic Buy Filter
If this option is selected, the fund being considered for purchase must be above the para-
bolic curve prior to purchase.
Beta Buy Filter
This option will prevent purchase of a fund that has a beta greater than specified by the
filter. The index used to calculate beta is specified on the Funds/Index Tab. This option
has at least two uses. One, it can be used to build trading systems that have low volatil-
ity. The second use is to build trading systems that perform better in volatile or down
markets. This is because high beta funds often move to the top of the buy rankings on
short term rallies during down markets, but the rallies are false rallies that fail very
quickly. There are often funds that have a low beta that continue to trend upward in the
down market, but they are “overshadowed” by the high beta fund.
There are two parameters for this option. A maximum beta and a period over which the
correlation is calculated (recommended range is 50-100 days). If the beta is set to a very
low value, the strategy may be unable to find a fund suitable for purchase. If this is the
case, the money market fund will be purchased.
A recommended way to use this option is to make a baseline strategy run and look at the
beta value in the Summary output. Typical mutual fund systems can have betas of 2-3.
After making the baseline run, use a beta filter value of 1.5 to make a second run and
compare the results with the baseline run.
The user can choose whether to calculate a true beta using correlation or without correla-
tion. Beta is the ratio of the volatility of a fund divided by the volatility of an index (typi-
cally the S&P 500), multiplied by a correlation value between the fund and the index. If
a fund has a low correlation to the index it can have a low beta but be a very volatile
fund. An example would be a gold fund. Gold funds have a low or even negative market
correlation and yet are very volatile. Filtering on standard beta may not filter out a gold
fund. Using the non-correlated beta filter allows a user to mix a wide range of fund