EdgeWare FastBreak Pro Version 5 - Manual (Page 33)

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described in the Appendix. Note: Activation of the Maximize Robustness option will
triple run time; however, we believe it is critical to building good trading systems. If
robustness is not activated, the optimized trading systems are very susceptible to over-
optimization.
We have found that, under some circumstances, strategies with more stop loss and buy
filters options activated can lead to non-robust strategies. We have added a penalty
function:
The user-defined penalty value is raised to a power (exponent) that is equal to the number
of stops used. A recommended penalty value is 0.99 For example, if a single stop is
used, a strategy adjusted performance will be reduced by multiplying by the penalty (0.99
in the default). If two stops are used, the penalty is (0.99 x 0.99). This will push toward
using fewer stop and buy filter options. If you find that FastBreak continues to select
strategies with too many stop functions activated, then try changing the penalty to smaller
values, i.e., 0.98, 0.97 etc., and this will reduce the number of options used. We
recommend that this option always be activated.
You can also drive toward strategies that have a user-defined maximum number of
switches:
Check the Minimize Switches per Year box and input the maximum acceptable number.
Strategies that have greater than the user defined number of switches will have a penalty
added such that these strategies will not tend to “survive.” The penalty is simply the
desired number of switches per year divided by the strategy historical number of switches
per year. This option will force strategies to evolve toward the number of switches
desired. This can be a very useful function because many mutual fund companies
discourage excessive trading.
If the user desires strategies that have a maximum beta or maximum correlation, then use
the following options:
For example, if the user wants the strategy to have a maximum beta of 0.75 (as measured
against the S&P 500 Index) over any 50 day period of the trading strategy, then the above
option would be used. The maximum beta value acceptable needs to be input, as well as
the index and period for the beta calculation. The S&P 500 is the most common index
for measuring beta, and is the default index, but any index or fund in the FastTrack