From the October 2013 issue of Futures Magazine • Subscribe!

Computerized technical analysis: History lessons

The entrepreneur

One evening after work, hospital administrator Lou Mendelsohn stopped by a Radio Shack store to check out the “microcomputer” that he had just read about in The Wall Street Journal. It was a Model T Ford compared to what’s available today, but it was much more accessible than the mainframe IBM 360 that Mendelsohn was familiar with from his undergraduate days at Carnegie Mellon University in the 1960s. Then, using punch cards or a teletype machine, Mendelsohn had to submit his computer programs for processing and wait at least 12 hours to see if they ran successfully or had syntax errors. With a microcomputer, debugging took minutes instead of days. 

“Right after I first saw a demonstration of a personal computer, I realized that this new technology would revolutionize technical analysis and the financial markets forever, not to mention every other sphere of human activity,” Mendelsohn says.

Mendelsohn set his goals high. He says he set out to develop the most powerful commodity trading software that could be programmed at that time. To speed his development effort, he attached a five megabyte external hard disk (which he still displays in his office today) to a single Apple II+ computer. Eventually, to help compile source code into object code during debugging, he had 11 Apple II+ computers on a local area network attached to a 40-megabyte Corvus hard disk.

In 1979, Mendelsohn started his own trading software company, Market Technologies (originally called Investment Growth Corp.). His goal was to gain a competitive edge over other traders using his software, as well as make it available to other individual traders becoming exposed to computerized technical analysis.

Shortly after his first son, Lane, was born in 1980 and despite admonitions from his wife’s father, Mendelsohn left his career as a hospital administrator to devote full time to his passion as a commodity trader and trading software developer. This life-changing decision led to the 1983 introduction of ProfitTaker Futures Trading Software, the first commercially available strategy backtesting and optimization software for the personal computer in the financial industry (see “Anyone welcome,” right).

In February 1983, Mendelsohn submitted an article to Commodities (later that year renamed Futures) magazine addressing the unique intersection of computing technologies and technical analysis (see “Picking software programs: Know their limitations,” May 1983, Commodities). By then, Commodities had published a number of articles about technical analysis, but mostly covering visible chart patterns and trading techniques, not how individual traders might use a personal computer to develop, test and optimize trading strategies.

It was clear by then that the personal computer had the potential to change the face of financial market analysis and trading. Mendelsohn’s article demonstrated that he knew and understood the subtleties and nuances of commodity trading, which are unique and difficult for many traders to grasp, much less write about and program into computer software.

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