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1. Copyright Notice 2. Introduction 2.1. About this User's Guide 2.2. What is CoINFil? 3. Installation 3.1. Equipment Required 3.2. Installing CoINFil is simple. 3.3. Packing List 4. Getting Started 4.1. Quick Demo 4.2. Analyzing your own Investments 5. About CoINFil 5.1. Why was the program written? 5.2. What does the program do? 5.3. How does it work? 5.4. Before you can use the program, you must 5.5. To use the program 5.6. Input Files 5.7. Output Files 5.8. Menus 5.9. Graphs 6. Some Words from the Author 7. License and Registration 7.1. License 7.2. Registration 8. Warranty Statement 9. Appendices 9.1. Questions and Answers 9.2. Glossary 9.3. Error Messages 9.4. Registration Form 1 Copyright Notice The CoINFil program and documentation are Copyright 1992 by E. P. Rosack. All rights reserved. The information in this guide is subject to change without notice and does not represent a commitment on the part of the author or EPR Services. The Author and EPR Services take no responsibility for the use of any of the materials, methods, or software described in this User's Guide. The software described in this manual is furnished under a license agreement and may be used or copied only in accordance with the terms of the agreement. Please refer to sections seven and eight for warranty and license information. ------------------------------------------------------------------ 2 Introduction 2.1 About this User's Guide This Guide can be used in a number of ways. If you just want to get started, read the installation and quick start sections (3 and 4) and get going. To find out how the program works and understand some of the theory it is based on, read section 5 and 6. Section 5.8 and 5.9 go through the menus in detail and can be used for reference. Sections 7 and 8 protect our rights. Section 9 has some things that don't fit elsewhere, like a glossary to explain terms, and some common questions and answers. A list of error messages and some possible causes is also included in section 9. Conventions: CoINFil is menu driven. When discussing menus in the text, the top level will be called a menu and the selection within a menu will be called an item. These will be identified in the text by Bold, Underlined Characters for the letter that selects the particular menu and item. 2.2 What is CoINFil? o The name stands for COmparative Investment aNalysis with FILtered data. It is a technical analysis program that can be used to predict the trend of an investment's total yield based on past price data and dividends. o The price and dividend data for a collection of investments is stored together in a group. CoINFil uses Fourier transform based frequency analysis and backtesting to remove noisy data from price samples. The smoothed price data is added to the dividend data to predict each investment's total yield. The investment in a group with the highest predicted total yield is recommended. o The program was inspired by the need to manage IRA and 401K savings for maximum return. It was written by an engineer and reflects an engineering approach to investment analysis. It is based on the belief that fundamental analysis is flawed by the actions of many non-fundamental factors on market prices, and the belief that trends do exist in the market. In other words - the random walk isn't. ---------------------------------------------------------------- 3 Installation 3.1 Equipment Required CoINFil will run on any nearly any PC compatible computer with a minimum of 512K of memory. A disk drive with enough room for the files (~300K) is required. Any video adapter capable of displaying text can be used, but a CGA, EGA or VGA graphics adapter is required to view the graphs in graphics mode. CoINFil will run best from a fast 386 or 486 based computer, since the Fourier algorithms are computation intensive. A disk cache is highly recommended to speed up file access, especially during backtesting of large files. A printer is optional, but recommended for hard copy output. CoINFil will use a mouse, if present. CoINFil's edit and list functions require that you supply editor and listing programs (use your favorite -- none are provided with CoINFil). 3.2 Installing CoINFil is simple. 1. Create a directory on your drive called COINFIL. 2. Copy the distribution files to the COINFIL directory. 3. If you are upgrading from version 1.0 of CoINFil, regenerate the .HST files for any of your unique data by running backtest with all enables off. 4. If you plan to use CoINFil with Windows, a .PIF file and ICON are provided. You may need to edit the .PIF for use with your system. 3.3 Packing List The following files are supplied on the CoINFil distribution disk. If you obtain this program from a friend or download it from a BBS, make sure that you have obtained all of these files: COINFIL.EXE COINFIL.INI COINFIL.PIF COINFIL.DOC INDICATE.CTL INDICATE .DAT INDICATE .HST README.DOC ------------------------------------------------------------------------ 4 Getting Started 4.1 Quick Demo CoINFil is supplied with data for a demo group called INDICATE. This data is not for any available investment, but rather for a number of market indicators. It contains the NASDAQ 500 index, the Dow Jones Industrial Average, the Dow Jones Bond Index, the one year treasury index and the prime rate. This file is the default file for the program when it is first installed. To begin, type CoINFil at the DOS prompt. CoINFil will start and read in the INDICATE data and control files and display the sign-on screen. Click on OK or hit enter. You can now try the various menu options. For example, select the Recommendations menu and the Review Recommendations item. CoINFil will display the buy and sell advise for the indicate data file along with a summary of results and a comparison to buy and hold. Next, select the View menu and the Raw Price item to display the prices (grey dots) versus the smoothed prices (blue line). It is a good idea to keep the INDICATE group data up to date. It can serve as a check on your other investment groups. For instance, if CoINFil indicates a "buy" recommendation for a stock or mutual fund you are tracking, a "buy" for the DJIA would be a confirming indicator. 4.2 Analyzing your own Investments There are six steps to anayzing your own investments: 1. Define the investments you want to include in a group. They should be ones that you can easily switch between. They should also be varied, with some volatile and some calm investments. 2. Collect weekly data for all of the investments in the group. For the analysis to be effective, CoINFil needs at least 15 to 25 weeks of data, and more is better. Historical data for investments is available on GEnie and CompuServe in various investment forums. The easiest way to get the data is to download two years worth from these services. 3. Convert the data into CoINFil's ASCII format files. Use the INDICATE files as an example. CoINFil is picky about the format of the input files, but it will try to warn you if it finds an error. Note: Future versions of CoINFil may offer download capabilities if enough interest is shown. EPR Services can also provide data files or conversions programs or services. Contact us on GEnie if you are interested. 4. Run the backtest portion of the program to determine the best parameters to use. Select the Enable Filter Analysis, Enable Fit Analysis and Enable Band Analysis items on the Backtest menu and then the Run Backtest item. CoINFil's algorithms will pick what it thinks are the best parameters. The user must review the COINFIL.OUT file after a backtest run to verify that CoINFil has picked appropriate parameters. Sometimes the parameters with the highest return are not useful due to the number of switches they generate, or they may be incompatible with the preferences of the investor. To see what investment switches you would have made if you had followed CoINFil's recommendations based on the current parameters, select the Review Recommendations item in the Recommendations menu. 5. Each week, enter the new data by selecting the Edit Data file item on the Edit menu, and add the new data to the end of the file. 6. Select the Generate Recommendations item from the Recommendation menu to update the .HST file and display current buy, hold, sell, or dump recommendations. ----------------------------------------------------------------------- 5 About CoINFil 5.1 Why was the program written? o The initial motivation was dissatisfaction with existing programs and methods of technical analysis. Programs tested did not make intuitive sense, or a the profit they generated was smaller than simple buy and hold, Other programs required the user to adjust values without an efficient way to test the results. o To keep records of investment prices, provide plots and listings of the data in various ways, and make recommendations on which ones to buy and sell based on parameters developed by backtesting the data against the program's algorithms. o Most company's 401K plans offer a choice of several investment types (stock, mutual fund, bond fund, money market), and the opportunity to switch between them several times a year. o IRA's and 401K plans are unique in that there are no tax consequences due to investment switching. In many cases there are no broker's fees, commissions or any other cost associated with these switches. This gives an IRA or 401K investor a tremendous advantage over the person trying to manage taxable investments, and it makes sense to examine how to take advantage of the opportunity. The program has been designed with this in mind. o It is a program for long term investors. It is not set up for short term traders, although the concepts could be applied over short terms as well. Note that many plans do have a maximum number of switches available in a year, so some restrictions may apply to you. Investigate this carefully. 5.2 What does the program do? o CoINFil stores price and dividend data for related investments together in a group file. For example all investments available in a particular 401K plan or a mutual fund family should be stored in that plan or family's group. o The user can edit and update the price data in the stored files. The data is stored in ASCII format and any editor can be used to change the file. CoINFil will call an editor you specify from within the program. Note that no editor is supplied with CoINFil. It defaults to DOS EDIT. You must use the options menu to tell CoINFil what editor to call to edit investment data. o Several views of the data can be presented. Raw, smoothed and predicted price are available as well as yield curves and moving averages. Graphs are available in text, CGA, EGA, or VGA modes. Historical data and program generated output data can also be viewed with a list program. o For each investment in the group, CoINFil will make a recommendation on what to do with that investment each week (buy, hold, sell, dump). o The program's algorithms use several parameters to determine what to recommend. There is a section of the program that will analyze the group data file to determine an optimum set of parameters to use based on what would have worked the best in the past. This is called backtesting. 5.3 How does it work? o The input data is smoothed using a digital filtering technique based on the Fourier and inverse Fourier transforms. Another way to put this is that a spectrum analysis is performed on the data. Some of the high frequency data is eliminated by the program. Then the frequencies are changed back to price data with the high frequency noise removed. The frequencies eliminated are determined by the backtesting algorithms, and are based on setting the cutoff frequency so that the resulting smoothed data most closely matches the actual data. You can see how this works by looking at the raw data graph in the view menu. The gray dots are raw data prices with no filtering performed. The blue line is the same data with the high frequency noise removed. The blue line represents what CoINFil thinks is the longer term trend. Since the curve used to fit the data is a complex sinewave series, it can be much more accurate than a straight line or other simpler methods. To experiment with different filter values, use the plus and minus keys to vary the selected filter and then hit the g key to recalculate the smoothed blue line. o The predicted yield for an investment is based on its estimated dividend yield and it's future appreciation. The future appreciation is computed using the last several (usually two) points of Fourier smoothed data to extrapolate what the appreciation would be if the trend continues. The dividend used is straight out of the data file. CoINFil does not adjust the dividend value when the price changes -- you must do it yourself. o The predicted yields for all of the investments in a group are compared and the best one is recommended. 5.4 Before you can use the program, you must: 1. Create a data file. The easiest way to do this is to copy the INDICATE.* files to a new name and edit them as appropriate. You can also use the Create a new group item in the File menu. 2. You must also establish the .CTL parameters using the backtest portion of the program. There are several parameters that are used by CoINFil: o The first is the filter factor. CoINFil uses a high pass filter function. The data is analyzed and divided into frequency components. Then all frequencies above a cutoff are removed from the data and the data is regenerated as a smoothed version of the raw data. The filter factor sets the cutoff frequency and determines the amount of smoothing applied by the filtering algorithm. The lower the number, the smoother the data. The higher the number, the noisier the data. What value should you use? CoINFil will help to determine the best values by trying every filter value in a range specified by the minfilter and maxfilter parameters on the option menu. It tries each filter value, determines the error produced by that filter value and remembers which filter produced the least error. Some problems can occur, which is why you must review the COINFIL.OUT file. The higher the filter value, the more frequent the switches recommended will be. You will need to examine the COINFIL.OUT file after a backtest is run and confirm or select a different filter value from the one chosen by CoINFil to reduce the number of switches to a level allowed by your 401K plan or mutual fund family. o Backtest also analyzes the data to determine a band parameter. The band parameter prevents switches unless the difference in yield between the investments exceeds the band. This is to prevent switches from becoming too frequent and "whipsawing" your investments (and feeding your broker's bank account). It is determined by trying all band values and selecting one that maximizes return over the period being tested. A higher band value can also be used to reduce the number of switches, but deviating from the value picked by the program may reduce the gain. o The last parameter determined by backtesting is fit. CoINFil defines fit as the difference between the raw data value and the smoothed data value. If the smoothed (or predicted) data value is too different from the raw data value, it means that the raw data is not behaving as CoINFil thinks it should. This parameter is used by the program as an indication of when the trend may be changing or when it is not predicting accurately. For instance, the fit between the programs predicted values and the actual price became very poor just before the 1987 crash, and was a signal to the program to "dump" several holdings. CoINFil indicates a "dump" if the raw data is far enough under the predicted data and a "hold" if the raw data is above the predicted even if the predicted yield is not the best of a group. o One additional complication to backtesting is that these parameters interact. That is, a change in the band can require a change in fit to optimize the return. You may want to run the initial backtest with all three backtest items selected. After that is complete, and depending on the results, you could rerun just the band or fit item to see if a better set of parameters is obtained. As you experiment with the program, you will gain experience in interpreting the backtesting results. 5.5 To use the program: Each week, use CoINFil to perform the following steps. 1. Start the program and choose a group file to work with. CoINFil defaults to the group file name that is stored in the .INI file, but it can be started with a command line parameter that will override the default. The default group file is written to the COINFIL.INI file whenever the Write options to .INI item in the File or Options menu item is selected. 2. Choose the Edit Data file item in the Edit menu to add the latest week's data to the end of the file. Be sure to follow the correct format. 3. Next, select the Generate Recommendations item from the Recommendations menu to display what the program thinks you should do this week based on the latest data. This item also updates the .HST file by storing this latest recommendation at the end of the file. The .HST file is a history of what the program recommends for each week. It can be viewed with the History File item or with the Predicted PriceGraph item on the View menu. 4. After the .HST file is updated, you can select any of the view items to examine the latest data. You will only occasionally need to run the backtest portion of the program. To backtest, perform the following steps: 1. Back up your .CTL and .HST files in case you want to return to the starting values. 2. Clear the .OUT file by selecting Delete COINFIL.OUT file from the File or Backtest menus (this is optional). 3. Plan your backtest run based on the type of computer you are using and the amount of data to be processed. You will gain a feeling for this as you use the program more, but as a general guideline, expect a frequency analysis backtest for a group file with several investments and 300 to 400 weeks of data to take all night to run on a fast 386 computer. You can break this up into small pieces by setting the min and max filter values on the options menu. You might for instance do one run with min filter at 1 and max at 5 and a second run with min filter at 6 and max at 10. Then you can look at the .OUT file and manually enter the best filter value from both subruns in the .CTL file using the Edit Control File item on the Edit menu. The fit and band backtesting runs much faster, since they use the .HST files as input data and do not need to recalculate the Fourier transforms. 4. Enable the analysis items you want to run on the Backtest menu and select the Run Backtest item. 5. When the backtest is complete, examine the .OUT file with the Output File item on the View menu. The program will have written a record of the steps taken during the run and their results. If you want to modify any parameters after viewing the .OUT file, do so by selecting Edit Control File from the Edit menu. 6. If you modify parameters, you should regenerate the .HST file. Do this using the Run Backtest item in the Backtest menu with all enables off. 5.6 Input Files COINFIL.INI: This file contains the initialization and control values used by CoINFil. The values in the file are described by the program whenever you select an item in the Options menu. The COINFIL.INI file is an ASCII file, however the user should not normally edit this file, since all of the values can be set from the CoINFil options menu. group.DAT: This file contains dates, prices, and dividends for each investment in the group. One entry is made for each investment for each week. All price values are entered as integer values (no decimal points). This is done to speed up the calculations CoINFil has to perform. Use as many digits as you can when entering prices, but remember to keep the values between zero and 32,000. Normally, prices are entered in cents, and dividends in percentage per year. A sample .DAT is shown below DJIA DJBI PRIME 1YRTI Date price div price div price div price div 9 27 91 3007 3.00 9703 8.60 1 8.00 1 5.70 10 4 91 2962 3.00 9730 8.60 1 8.00 1 5.50 10 11 91 2984 3.00 9703 8.60 1 8.00 1 5.40 10 18 91 3053 3.00 9725 8.60 1 8.00 1 5.36 10 25 91 3005 3.00 9687 8.60 1 8.00 1 5.33 11 1 91 3056 3.00 9740 8.60 1 8.00 1 5.39 11 8 91 3046 3.00 9786 8.60 1 7.50 1 5.15 11 15 91 2943 3.00 9771 8.60 1 7.50 1 5.00 group.CTL: This file contains the group investment names and control values. Make sure that your investment names do not use any delimmiting characters such as spaces, commas or quotation marks. CoINFil uses these to separate the names from each other in the file. The control values are developed by CoINFil using the backtesting algorithms. A sample .CTL is shown below. A filter value of -1 is used to tell CoINFil not to perform any backtesting on that investment. Do this for investments that have a constant price such as money market funds. Note that every group must have at least one constant value investment. The control value meanings are explained further in the glossary. band: 18 DJIA DJBI PRIME 1YRTI filter: 14.8 1 -1 -1 fithigh: 1.017 1.003 2 2 fitlow: .9869998 .9949997 0 0 group.HST: See below. CoINFil also uses the .HST file as an input for the backtesting algorithms when testing for band and fit. 5.7 Output Files COINFIL.INI: This file is also written by CoINFil when selected by the user. COINFIL.OUT: Holds the output data generated by the CoINFil program during backtesting, ASCII graph output, or recommendation review or generation. group.HST: This file stores CoINFil's recommendations for each investment in a group for each week there is data. CoINFil appends recommendations to this file each time the user selects the generate recommendations menu item. The recommendations consist of a buy, hold, sell or dump assessment for each investment. For sell or dump investments, CoINFil recommends which investment to switch into. These recommendations are based on the current values in the group.CTL files. If you change the .CTL file (by editing or by backtesting) the .HST file must be regenerated. CoINFil will do this automatically when backtesting is run. The user must force it to happen when the .CTL file is edited. You can force the .HST file to be regenerated by selecting Run Back Test from the Back Test menu with all enables turned off. A sample group.HST file is shown below. --- 7 3 92 --- 'File Input Div Output Trend Fit +DJIA , 3330 3.00 3318 -4.85 1.003 Sell. >Buy DJBI +DJBI , 10036 8.60 10014 14.31 1.002 Hold. +PRIME , 1 6.00 1 6.00 1.000 Hold. +1YRTI , 1 4.14 1 4.14 1.000 Hold. group.CTL: This file is also written to by CoINFil when backtesting is selected. 5.8 Menus CoINFil displays a menu bar across the top of the screen. To select a menu item, hold down the ALT key and the first letter of the menu to open the menu, and then select the item with the hot key that is highlighted. You can use the mouse by clicking on the desired menu and item. Arrow keys will also move between menus and items and enter will select the item. The tab key can be used to move between fields. CoINFil tries to use standard key combinations, for instance ALT F X will exit from the program. The table below describes the CoINFil menu structure. Menu Item Description File Open a different group file Displays the groups available on the disk and opens the one you select. File Change drive or directory Allows you to change the location to read data files from. File Create a new group file Creates skeleton group files (.DAT and .CTL) you can use to start collecting data. File Merge group with open group This item allows you to combine group files. You select another group, and it is combined with the group that is open when this item is selected. Using this item and the delete investment item from the edit menu, you can rearrange your groups and create new groups from existing ones. Be careful, and backup your data before you start. Note that each group can have a maximum of eight investments, and both groups must be up to date. If one group is shorter that the other, CoINFil will fill the beginning of the shorter group with constant values. File Delete CoINFil.OUT file Erases the COINFIL.OUT file. Use this when the file becomes too large or when you start a new backtest run. File Write options to .INI file Saves the current options to the COINFIL.INI file. File Dos Shell Shells to Dos. Type "exit" to return to CoINFil File Exit Exit the CoINFil program. Menu Item Description Edit Edit Data File Calls the editor program to edit the currently selected group's data file. Edit Edit Control File Calls the editor program to edit the currently selected group's control file. Use this item to manually modify the backtest parameters stored in the .CTL file. Edit Add an Investment Allows you to add an investment to a group without typing in a value for each date. This item fills in data for each date with default values you provide. Edit Delete an Investment Delete an investment from a group. Edit Scale Prices Scale the price data by a constant (to adjust for a capital gains distribution or stock splits). Allows you to enter a start and stop date for the scaling. Edit Scale Dividends Scale the dividend data by a constant (allows correction when dividends are declared). Allows you to enter a start and stop date for the scaling. Menu Item Description View Raw Price graph Displays a graph of the raw prices (gray dots) versus the Fourier smoothed data (blue line). The filter factor can be changed with the + and - keys while in graph mode (see the graph discussion) View Predicted Price graph Displays a graph of the smoothed price (blue line) versus the predicted price (yellow or red line). The fit values are also displayed as dotted lines above and below the smoothed price line. With color graphics modes, the predicted price line is red if CoINFil issued a 'dump' or 'sell' recommendation for that investment at that time. It will be yellow if CoINFil issued a 'buy' or 'hold' recommendation. View Moving Average graph Displays a graph of the raw prices (gray dots) versus a moving average of the prices (blue line). CoINFil does not use moving averages, but will display them for comparison purposes. The number of weeks in the average can be changed with the + and - keys while in graph mode. View Yield graph Displays a graph of the actual yield by week (gray dots) versus CoINFil's predicted yield (blue line). View History file Calls the list program to display the currently selected group's .HST file. View Output file Calls the list program to display the COINFIL.OUT file. View Documentation Calls the list program to display the COINFIL.DOC file Menu Item Description Recommen dations Generate Recommendations Generates recommendations based on the currently selected group's .DAT and .CTL files and appends them to the .HST file. You should do this once each week after you enter that week's data. Recommen dations Review Recommendations Analyzes the currently selected group's .HST file and lists the trades made over the length of the file. CoINFil also calculates the return you would have received by following its recommendations and compares it to buy and hold returns for each investment. Writes output to COINFIL.OUT. Recommen dations Graph Recommendations Displays a graph of the program's recommendations and the calculated total yield that resulted. The recommendations are shown at the top of the screen as a number of dots. The number represents which investment was recommended at that time. A list of investments in the group is displayed at the lower right on the graph. The yield is displayed for the investment that was recommended as a blue line. Menu Item Description Back Test Enable Filter Analysis A toggle to enable or disable the filter analysis portion of backtesting. Marked with >> when enabled. To run the filter or any other portion of the backtest, you must first enable it here and then select the Run Back Test item from this menu. Back Test Enable Fit Analysis A toggle to enable or disable the fit analysis portion of backtesting. Marked with >> when enabled. Back Test Enable Band Analysis A toggle to enable or disable the band analysis portion of backtesting. Marked with >> when enabled. Back Test Delete CoINFil.OUT Erases the COINFIL.OUT file. Use this when the file becomes too large or when you start a new backtest run. Back Test Run Back Test Starts backtesting. Make sure all .INI and enable parameters are set to what you want them to be before you select this item. See discussion of backtesting. Also writes results to COINFIL.OUT and the group .CTL files Menu Item Description Options Min Samples Min samples is the smallest number of samples that are required to perform a Fourier transform. The more samples that you use, the longer you have to wait before you can start predicting, and the better the predictions should be (25 is a good place to start). Min samples may also be changed when you graph the predicted price or the yield since the program will use the value that was current group's .HST file was created with. Options Max Samples Max samples is the most number of data points used in the Fourier transforms. The program is sized for a maximum of 400, and will use as many as are available, up to this limit. Using less than 400 will speed up the program but possibly reduce the accuracy of predictions. Options Extrapolation Samples Extrapolation samples is the number of most recent data points used in the least squares extrapolation. A small value will cause the program to react quickly to changes, and a larger value causes the program to switch less frequently. A value of 2 works well. Options Min Filter Min filter is the lower limit used when searching for the best filter to use for an investment. A larger number will make the analysis routines run for a shorter time, but may possibly cause the program to miss a good filter value. Options Max Filter Max filter is the upper limit used when searching for the best filter to use for an investment. A larger number will make the analysis routines take longer. A small number might cause the program to miss a good filter value. Options Sound When sound is on, CoINFil will announce errors with a `whoops' sound. If this annoys you, turn sound off. Options Graph Type Select Text mode graphs (this will also copy data to the COINFIL.OUT file), CGA, EGA, or VGA mode graphs to match the output to your monitor type. Options Colors Select the menu color scheme. Options Editor Name Enter the name of the editor program that you want CoINFil to call to edit the control and data files. This defaults to the DOS EDIT command until you change it. Options List Program Name Enter the name of the file lister program that you want CoINFil to call to list the .HST and COINFIL.OUT files. This defaults to the DOS TYPE command until you change it. Options Write .INI File Select `OK' to save these values to the COINFIL.INI file. Select `Cancel' to bypass the file write. CoINFil will still use these values for the current session. In addition to the parameters shown on the menu, the current group name is saved and becomes the default the next time the program is started. Menu Item Description CoINFil About CoINFil Displays the version number and registration information. Also gives advice or guidance in the form of an investment related quotation. 5.9 Graphs CoINFil can display a number of graphs. If you select text mode the graphs are displayed using characters and written to the COINFIL.OUT disk file. If you have one of the common graphics cards, CoINFil will detect it and set the graph mode automatically. In CGA, Hercules, EGA or VGA mode, the following keys are active while CoINFil is displaying a graph (the keys that are not available when the predicted prices or yield are displayed are indicated with a No in the second column): Active for Predicted and Yield Key graphs? Action x Yes Exit. Return to CoINFil's main menu. c Yes Change to the next investment in the group. z Yes Zoom. Enlarges the latest portion of data. u Yes Unzoom. Brings in more of the older data. 0 Yes Zero. Makes the bottom of the screen equal to zero instead of equal to the lowest price for the investment during the period plotted. l Yes Low. Makes the bottom of the screen equal to the lowest price for an investment during the period plotted.. n Yes Normalize. Makes the top of the screen equal to a power of 10 times 1, 2, or 5. Makes the bottom equal to zero or a power of 10 times 1, 2 or 5. Most useful for the yield displays. + No Plus. Increases the filter factor or the number of weeks in the average. Has no effect until the g key is pressed. - No Minus. Decreases the filter factor or the number of weeks in the average. Has no effect until the g key is pressed. g No Go. Recalculates and displays graph based on the latest value of filter or weeks. r Yes Reset. Resets the scale and filter to the default values. --------------------------------------------------------------------------- 6 Some Words from the Author Thank you for your support for the program and for taking the time to read the user's guide. CoINFil is a complicated program, but it offers many advantages once it is understood. If you understand the program and use it, it will make sense (cents). Over a period of a year or more, it shows a marked advantage over the buy and hold strategy for most groups of investments. It was a challenging program to write and would not have been possible to develop for personal computers until quite recently when more powerful processors have become available. Please continue reading the guide, and please pay special attention to the warranty statement. This program is being made available for your use under the terms of the license, but you are responsible for what you do with the program. Neither EPR Services or myself are accountable for what happens when you use this program. CoINFil is designed to track trends and make recommendations based on those trends. The future is constantly changing, and the program does not claim to be able to predict the future. It simply makes a very good guess about what the current trends are. Trends change, and many factors are not known by the program. If interest rates change, a war starts, or congress balances the budget, all investments would be profoundly affected. CoINFil can not predict these events or others such as bankruptcy or dividend reductions. The point is that you must use your own judgment and that this program is just one of the tools that you can use to make investment decisions. You must still be a prudent investor. Diversity and fundamentals are a very important base to begin from. Tracking trends among a group of losers is no way to increase your net worth. --------------------------------------------------------------- 7 License and Registration 7.1 License This software and the disks on which it is contained are licensed to you for your own use. This is copyrighted software. You are not obtaining title to the software or any copyright rights. You may not sublicense, rent, lease, convey, modify, translate, convert to another programming language, decompile or disassemble the software for any purpose. You may make as many copies of this software as you need for backup purposes. You may use this software on more than one computer, provided there is no chance it will be used simultaneously on more than one computer. If you need to use the software on more than one computer simultaneously, please contact EPR Services for information about site licenses. Individual users may freely copy this disk and share it with friends and family. Nonprofit groups (including user groups and BBSs) may distribute copies of this disk provided that the fee charged to cover the cost of copying disks does not exceed $5.00. Disk distributors and dealers must have written permission before selling copies of this program. 7.2 Registration This program is shareware. It is a fully functional version of the CoINFil program. You are granted a license to use this software for a period of 60 days. At the end of this period you are required to register your copy to continue using CoINFil. The registration fee is $35.00 (including shipping). Registered users will receive the latest version of the software, an up to date INDICATE.DAT file, one additional update free, and a utility program to convert CIS format historical quotes to CoINFil format. Registered users will also receive a printed copy of the user's manual and free technical support via GEnie or CompuServe (details sent with registration). In addition, there are versions of CoINFil that are tailored for specific hardware that are only available to registered users. To register a copy of CoINFil, fill in the form in the back of the manual and mail along with your check for $35.00 to EPR Services. ----------------------------------------------------------------- 8 Warranty Statement EPR SERVICES DISCLAIMS ALL WARRANTIES RELATING TO THIS SOFTWARE, WHETHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND ALL SUCH WARRANTIES ARE EXPRESSLY AND SPECIFICALLY DISCLAIMED. NEITHER EPR SERVICES NOR ANYONE ELSE WHO HAS BEEN INVOLVED IN THE CREATION, PRODUCTION, OR DELIVERY OF THIS SOFTWARE SHALL BE LIABLE FOR ANY INDIRECT, CONSEQUENTIAL, OR INCIDENTAL DAMAGES ARISING OUT OF THE USE OR INABILITY TO USE SUCH SOFTWARE EVEN IF EPR SERVICES HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR CLAIMS. IN NO EVENT SHALL EPR SERVICES LIABILITY FOR ANY DAMAGES EVER EXCEED THE PRICE PAID FOR THE LICENSE TO USE THE SOFTWARE REGARDLESS OF THE FORM OF CLAIM. THE PERSON USING THE SOFTWARE BEARS ALL RISK AS TO THE QUALITY AND PERFORMANCE OF THE SOFTWARE. Some states do not allow the exclusion of the limit of liability for consequential or incidental damages, so the above limitation may not apply to you. This agreement shall be governed by the laws of the State of Florida and shall inure to the benefit of EPR Services and any successors , administrators, heirs and assigns. Any action or proceeding brought by either party against the other arising out of or related to this agreement shall be brought only in a STATE or FEDERAL COURT of competent jurisdiction located in Volusia County, Florida. The parties hereby consent to in personam jurisdiction of said courts. ---------------------------------------------------------------- 9 Appendices 9.1 Questions and Answers 1. How do you print CoINFil graphs? You must use the DOS print screen function to print from within the program. Load the DOS graphics program before you start CoINFil and print the graph screens by pressing shift printscreen. 2. How much data is needed to run CoINFil? You can't have enough data! The more data, the better the backtest algorithms should work. Different conditions may not show up in short time intervals. Rising and falling markets need to be represented so that the parameters derived by backtesting accurately reflect the investments behavior in a wide variety of conditions. A second consideration is the composition of the investment group. A wide variety of investments will give the program more to choose from. In addition to different types of investments, consider investments of the same type with different volatility. 3. I don't understand the difference between listing the history file and reviewing recommendations. What's the difference? The .HST file contains a recommendation for each investment in the group. CoINFil makes a recommendation for an investment even if it hasn't recommended holding that investment for some time. It does this so that a user can begin following CoINFil recommendations at any time, and not just when CoINFil recommends a switch. The review history function analyzes the .HST file to display which single investment CoINFil recommends at any one time, the switches between investments recommended by CoINFil, and the results obtained (balance and gain). 4. The yield and predicted data graphs for my investment group sometimes show a very high or low value for the most recent date. I checked the .DAT file and the price information is correct. What's wrong? It's possible that you forgot to update the .HST file after you entered the data in the .DAT file. You must select the Generate Recommendations item from the recommendations menu to append the latest week's recommendations to the .HST file. 5. I selected the recommendations item more than once during a week and now my .HST file has more than one entry for the week. How do I fix this? The extra entries should not do any harm, but you can edit the .HST file with any ASCII text editor to remove them. If your .HST file gets really corrupted, you can regenerate it with the backtest menu by leaving all enables off and selecting run backtest. 6. What's the easiest way to get my data into CoINFil's format? CoINFil uses a straightforward ASCII format for storing data. You can edit CoINFil's files using an editor capable of reading and writing ASCII files. You can also output ASCII files from many spreadsheet and use an editor to clean up the format. EPR Services has many file translation utilities available, and a utility to convert from CompuServe historical quote format is provided with registration. Registered users may also contact us on GEnie to see if one is available for data that you have. 7. This program runs very slowly on my computer. How can I speed it up? CoINFil will run slowly when the amount of data you are processing gets large. This is because the Fourier transform programs are computation intensive and use many sine and cosine calculations. The use of a math coprocessor chip greatly speeds up these computations. If you don't have a coprocessor chip, order version 1.0 N of CoINFil when you register. This version is compiled with an alternate math library that is about 4 times faster than the general version for computers without a coprocessor. You should also run CoINFil with a disk cache. This will speed up file operations and make fit and band backtesting run much faster. 8. The dividend yield is entered as a percent, but this will change as the price of a stock goes up or down. Why doesn't the program adjust for this? Maybe it should, but for now, it relies on the user to enter the correct dividend. 9. Why is this program better than other technical analysis programs? What makes it better in my mind is that it is not contrived. The algorithm is based on something that makes sense, not arbitrary patterns that someone has recognized. CoINFil has also been tested against several groups of investments going back to 1985, and it beats a buy and hold strategy consistently. Compared to moving averages, the use of Fourier transforms to smooth the data does not introduce time lags. The Fourier transform also fits a sine wave summation to the data giving a more accurate fit than a straight line or other approximations. This program provides everything you need to monitor trends -- the parameters can be changed by the user and tested without purchasing a separate program. 10. If this program is so good, why aren't you rich? I'm getting there. 9.2 Glossary band: The difference between the investment trends required before a switch will take place. dividend: CoINFil uses the estimated annual dividend (in percent / year) to determine the total yield for an investment filter: The filter factor used by the program. Filter is proportional to the cutoff frequency of the low pass filter used to remove noise from the data. A lower number will generate smoother data. fit: The difference between the predicted price and the actual price. 1 if input and predicted price are equal. <1 if input lower than predicted. >1 if input more than predicted. Fit is a function of the market as a whole, the volatility of the individual investments, and the parameters in the group.CTL file. fit high: If the fit is equal to 1, the program output is tracking the input data very well. The fit high parameter is used by the program to determine when not to buy in. When the fit is above fit high, the investment is too costly to purchase. fit low: If the fit is less than fit low, the program is not tracking the input data very well. This is an indication to avoid this investment or dump it if you are currently holding it. Fourier transform: A method invented by Mr. Fourier that decomposes any signal into a collection of sine waves. Each sine wave has a frequency and an amplitude. Once a signal has been decomposed, various frequency components can be isolated by removing them from the signal description. The signal can be reconstructed without those frequency components by performing an inverse Fourier Transform. In theory, Fourier transforms can isolate the low frequency trend from the high frequency noise. group: A related collection of investments that you want to analyze as a group. All of the price and dividend data for a group is stored in the group.DAT file and the control values for the group are stored in the group.CTL file. Examples would be all of the available investments in a mutual fund family; the different choices available in your companies 401K plan; several stocks that you are interested in and want to compare. investment: An individual investment within a group. Examples would be a money market fund, a bond fund, a mutual fund, a stock, or even savings bonds. price: CoINFil uses Friday's closing price for each investment. trend: This is CoINFil's term for the projected annual yield. It is based on an interpolation of the last several smoothed data points, added to the dividend. CoINFil will recommend the investment in a group with the highest predicted trend as long as the difference in trends exceeds the band for a group and as long as the investment's price is not too different from the predicted price (the allowable difference is determined by the fit parameters). 9.3 Error Messages There are no files present in this directory -- You have changed to a directory with no .DAT files. Change back to the directory with your CoINFil files. Both group names are the same! Group names must be different for merge. -- To merge files, you have to specify two different file names. Too many investments. The total number of investments must be 8 or less. -- You tried to merge two groups and the total number of investments in both is more than eight. You will have to delete investment(s) or organize groups differently The files do not end on the same date. Both files must be current to merge. -- When you merge two data files, they must both be current. They can be different lengths and CoINFil will fill the beginning of the short file. There are 8 investments in this group. Can not add another. -- You tried to add an investment to a group with eight investements. Delete one or organize the groups differently. The group.ctl file does not exist!! -- Could not find the .CTL file. Is this a new group? If so, you need a .CTL file. Use an existing one for a model and edit it to put in the correct names and control values. There is no investment in this group with a filter factor set to less than zero. Every group must have one investment that has a constant value (typically a money market fund) to serve as a default investment for times when the other investments in a group are not suitable. This constant value investment is signified by setting the filter factor to -1 in the CTL file. Please correct this. -- Add a money market fund to this group. The algorithm won't work unless it has a constant value investment to bail out to when everthing else goes south. Month number is out of range. -- Dates in the .DAT file are messed up. Could be caused by other format errors too. Day number is out of range. -- Dates in the .DAT file are messed up. Could be caused by other format errors too. Year number is out of range. -- Dates in the .DAT file are messed up. Could be caused by other format errors too. Price data is negative. -- How did this happen? Check your .DAT file for format errors. There are too many data items in this file. The program is limited to data for 400 dates (or less). To use this file you will have to delete 1 or more lines from the beginning of the file. -- Well, you maxed out. Delete some data. There is a problem with the data in the last line of the group file. Please check before you continue. -- Some garbage at the end of the file? The group.HST file does not exist. Do you want the program to recreate it for you? -- Did it get deleted? The Run Back Test item will fix this for you. 9.4 Registration Form The registration fee is $35.00 (including shipping). Registered users will receive the latest version of the software and the INDICATE.DAT FILE and one additional update free. Registered users will also receive a printed copy of the user's manual and a utility program that converts CompuServe format historical quotes to CoINFil format. EPR services will provide technical support to registered users via GEnie and / or CompuServe (details will be provided to registered users). In addition, there are versions of CoINFil that are tailored for specific hardware and that are only available to registered users. To register a copy of CoINFil, fill in this form and mail along with your check for $35.00 to EPR Services. EPR Services 1106 Sherbourne Way Ormond Beach, FL. 32174 REGISTERED USER'S NAME:____________________________________________ RETURN ADDRESS: STREET:___________________________________________ CITY:_________________________, STATE:_________ ZIP____________ PAYMENT ENCLOSED: $ CHECK MONEY ORDER CHECK THE VERSION OF CoINFil YOU WANT RETURNED WITH YOUR MANUAL: Version Description 1.3 G Runs with any processor 8088 - 80486. Does not require math coprocessor - will use one if present 1.3 T Includes code for 286 and above processors. 1.3 N Ignores math coprocessor, but will run up to 4 times faster than 1.3 G on computers without a coprocessor chip 1.3 NT Combines versions N and T. CHECK THE SIZE DISK YOU WOULD LIKE: 3.5" 5.25" Please give us your comments on the CoINFil program below.