Although I didn't write the math behind this feature, I use it very regularly and will try to explain.
When the generator/optimizer runs, a balance line is produced, which is visible on the screen during the processing.
In the background, there is also a 'target balance line', which is a straight line from the opening balance to the closing balance. This line has the same number of data points as the balance line, and is what we would all like our strategies to look like (although most of us know this will never be the case).
Let assume that we have a balance line with 100 points, and a target balance line with the same number of data points, and they are not identical (the balance line will always have ups and downs while the target balance line will always be straight). The two lines can now be compared to see how different they are.
The checking process is very simple, it picks points on both the balance and target balance lines where comparisons will be made. The number of points are evenly spaced, and depend on the settings entered in the 'Check Points' field in the generator/optimizer 'Limitations' tab.
The balance line and target balance line are compared at each 'check point' and the % deviation is calculated.
Any strategies that have a deviation % greater than the allowable (again this is set by the user) us filtered and doesn't make it into the 'Top 10'.
Hope this helps.