EdgeWare FastBreak Standard Version 5 - Manual (Page 69)

69
If you compare the signal file results with the Detail file results you will observe. Each
time FastBreak sells the money market fund a Buy, i.e., “B” in the signal file, is gener-
ated. Each time FastBreak moves from one of the indexes back to money market a Sell,
i.e., “S” is generated. If one index is sold and the other index purchased, no signal is
generated. In other words, the FastBreak signal file stays on a Buy as long as you are in
one of the fund family positions. FastBreak only generates buys and sells when moving
from a fund to the money market or from the money market to a fund.
Once you have built a market timing signal strategy just save the strategy in a DFT file
like you would a regular FastBreak strategy. If you build a strategy that uses this market
timing signal you will need to load and run the signal strategy prior to running the actual
trading system strategy.
FastBreak can be used in a variety of ways to build signals. It can be used to switch be-
tween a single index and money market or between a family of different indexes and
money market. Why would an investor want a family of indexes? There are time periods
when large cap stocks do well, other times small caps or value stocks do well. If a mar-
ket timing signal is based on a single index, that index may move you out of the market
when other market segments are still performing well. It may be better to stay invested
and let a FastBreak strategy rotate you out of the weaker funds or stocks and into those
funds and stocks that are still advancing.
Investors can also use FastBreak to build sector specific market signals. For example, we
have had good experience with building signals that time the energy sector. A signal was
built that switched between an energy sector index and money market. The signal would
switch out of the energy sector when the overall sector was in a decline. This signal was
then used to build a FastBreak trading system that trades individual energy sector stocks.
Comments on Using Market Timing Signals
It has been our experience that FastBreak strategies don’t need “perfect” market timing
signals, that is, signals that catch each market rise and dip. In weaker markets there may
be large numbers funds or markets that are still in up trends. What we have found is that
in extremely poor markets, i.e., 2001 – 2002, it may be prudent to step aside. In a severe
bear market there may be strong rallies, especially for individual stocks. These strong
rallies may result in strategy purchases, even when using the trend confirming Buy Filters
available in FastBreak. The funds or stocks that are purchased during these strong bear
market rallies often don’t have sustainable trends and will quickly sell off because they
are pulled down by the overall market.
It is our advice that when building signals for use in FastBreak strategies, keep the num-
ber of signal switches to a minimum.