EdgeWare FastBreak Standard Version 5 - Manual (Page 84)

84
Ulcer Performance Index
The Ulcer Performance Index is defined in Martin & McCann’s book The Investor’s
Guide to Fidelity Mutual Funds. The Ulcer Performance Index, UPI, is a measure of risk
adjusted return. It is a measure of the investment performance over money market re-
turns compared to the amount of risk. In general, the higher the value of UPI the better
the strategy.
UPI = ANN - 5.4
UI
Where:
ANN = The compound annual return of a fund or strategy over a test period.
5.4 = The annual performance of a money market over the FastTrack data
history
UI = The Ulcer Index over the test period.
Parabolic Stop
The parabolic stop system was developed by Welles Wilder and is documented in many
books on technical analysis. The system can be used to generate both buy and sell points.
The parabolic formula can be summarized as follows:
Par
2
= Par
1
+ Acc_fac x {high_of_trade - Par
1
}
Where:
Par
2
= Tomorrow’s parabolic value
Par
1
= Today’s parabolic value
Acc_fac = Acceleration factor
high_of_trade = Highest price since the trade was established
The fund is held until the mutual fund NAV becomes equal to or drops below the Par
value. The initial value of the parabolic for a long trade is set to the lowest price reached
while the fund was trading below the parabolic.
Wilder suggested setting the initial value of the acceleration factor to 0.02 and increased
by 0.02 each time the trading vehicle (stock, commodity, etc.) hit a new high during the
trade. He also suggested a maximum value of 0.2. Traders using this function for mutual
funds have found the 0.02 increase for each new high to be too large a value. A more
reasonable value is in the 0.001-0.0001 range. FastBreak allows the user to set the start-
ing, maximum, delta increase.