Trading system analysis: Then and now

Artificial intelligence

While TradeStation brought system trading design and execution to the masses, the native version of the software was built around mathematical-based indicators that had been in use for decades — moving averages, oscillators, price patterns, statistics, etc. For many, the real future was in advanced analysis strategies, often lumped under the broad and hard-to-define heading of “artificial intelligence.”

In 1988, this author co-founded a company called Promised Land Technology. A neural network add-in was developed for Microsoft Excel called Braincel. Many clients wanted to use Braincel to predict stock and commodity markets. We obliged and, as such, got involved in the trading business. We built a backtesting add-in for Excel called Futures Builder. Users programed their ideas in Visual Basic for Applications. The add-in provided performance reports and generated next-day orders.

More important, though, neural network tools were integrated with trading system strategies. One system that was packaged with Futures Builder was a 30-year Treasury bond system that used a neural network to predict a moving average crossover.

Other companies were using neural networks, of course. In early 1994, NeuralWare released a trading system development product called Predict. Several years later, the company came out with NeuralShell Trader as a standalone product. Both of these embedded neural networks, genetic algorithms and backtesting into one platform. NeuralShell Trader still is being developed and sold today. 

Many of the products that were state-of-the-art during this Golden Age of development are gone: ProfitTaker, Advance Chartist and Excaliber all were once considered cutting edge at one point but failed to continue and improve. Products such as TradeStation with its programming language and add-in API eliminated the need for traders/software developers to continue developing custom tools.

Now, we find ourselves at another frontier. Needs have shifted to portfolio capabilities and advanced programmable money management. Increasingly, more traders are seeking advanced analysis for both equities and futures. There also is interest for integrated trading strategies that incorporate neural networks, cycle analysis and genetic algorithms. This is good because the best trading tools are born from the need to get an edge in the markets and make a living from trading.

Software is only half the battle. Hardware is advancing at an impressive rate. Both Multicharts and TradersStudio Multicore take advantage of today’s multi-core machines. TradeStation’s charts currently have multi-core support, and expansion to the software’s backtesting engine can’t be far behind. However, for this new generation of software, systems and developers to evolve the status quo, the technology and the exploitation of that technology have to advance hand-in-hand. As that happens, expect powerful new tools to uncover exciting new ways to exploit market inefficiencies.

Murray A. Ruggiero Jr. is the author of “Cybernetic Trading Strategies” (Wiley). E-mail him at 

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About the Author
Murray A. Ruggiero Jr.

Murray A. Ruggiero Jr. is the author of "Cybernetic Trading Strategies" (Wiley). E-mail him at

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