Mastering technology

This issue of Futures does not only represent our 500th, it is also the 20-year anniversary of our Technology & Trading feature, almost exclusively written by Murray Ruggiero. Murray has been writing for Futures since 1994. We recently sat down with him to find out what he’s learned from two decades of writing about technology in trading.

Futures Magazine: How did you get involved in trading?

Murray Ruggiero: I have an undergraduate degree in physics astronomy and computer hardware/software. My first job was conducting failure testing of jet engines. I then ended up at Olin Chemical helping out the researchers. That’s when I got my introduction to artificial intelligence (AI). We would use all these databases to try to find relationships among physical properties. We were buying all these products to analyze the databases, and one of the scientists there asked, “Can’t I just plug this into my damn spreadsheet?” That was the genesis of Braincell back in the late 1980s.

Braincell was originally a neural network embedded into a Lotus clone. But when it was reviewed, it was reviewed as a spreadsheet and not as a neural network.

So, we pivoted our concept and made it an add-in to Excel. We were at the Windows 3 rollout in Boston in 1991. It took off and our clients were using it to trade the markets. Because of that, I had to learn the markets to help my clients use Braincell effectively. One of the early uses I found that worked was using neural nets to predict moving averages. I learned early on that you can’t treat the markets as a signal-processing problem. You can’t just data mine relationships and expect to find something that is robust. You must have domain expertise. I committed to learning technical analysis. My goal was to become a technician without using AI.

FM: What was your approach to get that trading education?

MR: A lot of reading. A lot of testing. I made a lot of friends whom I learned from. For example, I got to know George Pruitt over at Futures Truth around this time. Because of Braincell, I had a lot of notoriety—we were in Business Week; we were in The Wall Street Journal two or three times. It was easy to get people in the business to talk to me. Then in December ‘93 or January ‘94 I ended up calling Ginger Szala at Futures magazine and she gave me an assignment, which was basically a smoothing of data using neural nets to compress data, to filter the data to have a zero lag filter.

A lot of the early articles were on neural nets. Most of the people writing about neural nets weren’t combining them with domain expertise. People were expecting too much of them. I knew this approach was doomed to failure and that I would have to incorporate traditional technical analysis to have a long career. I could give it a technology twist, but I knew neural nets on their own didn’t have a long shelf life.

FM: How did you develop more as a technician?

MR: In 1995, Larry Williams hired me as a consultant and I worked for him about three-and-a-half years. Larry would basically have me conduct research projects. Some of it he would keep proprietary and some he would let me disclose. But he was very instrumental in my development. Larry is one of the few people in the business who actually understands the problem solving required to make stuff that works. One of the things that came out of my research for Larry was the adaptive channel breakout concept—setting the channel length to the dominant cycle. Larry told me, “Channel breakout works, but the length has to be right. You figure out how to adapt it. That’s your project.”

That’s how he would leave it. This is one concept that I’ve covered in Futures, and I’ve used it in a couple systems. If you have a 30-day cycle, the market should go up for 15 days and down for 15, ideally speaking. So my underlying concept was you have an n-day high or low where the "n" is approximately the dominant cycle length.

Page 1 of 3