Trading system analysis: Then and now

At the time Excalibur was invented, it was the only retail-oriented commercial software to support completely custom, built-from-scratch trading systems. The synergy between a veteran trader and veteran programmer was tremendous. Their efforts gave birth to software that was a substantial achievement in the world of algorithmic trading and testing.

There were three key components that made Excalibur ahead of its time: Portfolio analysis, daily and intraday testing and testing on contract data that incorporated rollovers. This last component meant that the software didn’t have to rely on back-adjusted time series. Because futures contracts have finite lives, traders often “stitch” multiple contracts together for continuous long-term testing. This creates either unnatural gaps in the series when liquidity shifts from one contract to the next or the individual contracts have to be adjusted higher or lower to eliminate the gap. For Hill, personally, this last feature was critical. Many of his strategies depended on individual contract behavior that he believed was lost in back-adjusted data.

However, it wasn’t all perfect. While the Apple operating system and its user-friendly GUI made development easier, the language was a derivative of FORTRAN and did require programming knowledge (see “Speaking in code,” above). Also, early versions of the software did not incorporate graphics or take full advantage of the visual power of Apple’s system. A sample performance report can be seen in “Raw results” (below).

George Pruitt joined the Excalibur team in 1989 to help develop a GUI interface for the software and also a graphing package. Without the ability to graph the data, including indicators and trades, most found it difficult to validate their trading algorithms. With his experience in Pascal and the C programming language, Pruitt was able to work with the Macintosh platform easily. Within a year, the complete Excalibur software was available for public consumption. Futures Truth still uses the software today to help develop and test trading ideas and systems for their commodity trading advisor and the publication, “Futures Truth.”

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