The history of TradeStation and EasyLanguage is the story of the american dream. Brothers William and Rafael Cruz came to the United States together from Cuba. They trained to become award-winning classical violinists together. Classical music was not in their future though as it seems divine forces had another plan – the music of the markets. When Bill (William) was 16, a phone call changed his destiny. A futures broker tried to cold-call his father but Bill took the call. That is how Bill learned about futures trading. Since he was only 16, he would have to wait for two more years to trade, however the trading bug bit him. During these two years he read books about trading and tried to learn as much as he could before his 18th birthday when he could start trading. When he turned 18, both he and Ralph (Rafael) pooled $2400 into a futures account and traded pork bellies.
They started well but ultimately lost all the money in a month or so. They still believed in trading and knew there must be a better way. They went to the library, got pork bellies data and made hand charts. They then used these hand charts to test ideas. They added arrows – up for buy and down for sell – to these hand drawn charts in order to test their ideas. Drawing the charts took a lot of time so they came up with the idea of using plastic sheets over the chart and using erasable markers. This way they did not have to redraw the charts and they could test many ideas. Still doing hand charting and analysis is very time consuming and they figured that computers might be able to help automate that process. This all happened around 1979. While in college, Bill met Kip Irvine, a music major who had a minor in computers. Since in those days, it was hard to get your musical compositions played, he then cut a deal with Kip to play his compositions for him if he programmed his trading ideas. The systems were hardcoded and coding them took quite a bit of time. The problem was that Bill had more ideas than Kip had time. This meant that Bill who had never coded in his life, had to find a way he could do this himself. He thought that if he could develop an easy way to express trading ideas he could develop his systems himself. This was the seed of the development of EasyLanguage. Bill and Ralph decided to start a company and began hiring talented people to program the software. The original development team included Kip Irvine, Sam Tennis, Peter Parandjuk and Liren Ji in engineering. Ruben Triana and Darla Tuttle were in product management. They developed the early stages of System Writer, which originated from Bill and Ralph’s need to develop and backtest their own trading ideas.
These ideas primarily involved trading pork bellies and other markets. They also briefly tried to market trading systems but their real passion was developing this backtesting software. They released System Writer one week before Black Monday in 1987. The paradigm which System Writer used was written to process one bar at a time and variables were assigned past values based on previous bars with bar 0 being the current bar. This was an outgrowth of the fact that Bill originally hand charted everything so he thought in terms of bars and adding to his analysis one day at a time. In addition, System Writer allowed you to write your own functions. This was an incredible advancement! Now a trader with little programming knowledge could extend the product himself and develop his own trading ideas.
History of TradeStation, Omega Research Founded
This new startup company called Omega Research (eventually renamed TradeStation), had a bright future but started out roughly. People were not aware of backtesting and many traders did not yet realize their need for the product. The reason behind it was backtesting at least told you what did not work. Past performance was no guarantee of future results; yet if a system did not backtest well, it would not work in the future. Once someone figured out the value of backtesting their only option was System Writer.
They then worked on System Writer Plus which was released in 1989. Bruce Babcock of CTCR fame helped spread the word about backtesting in the formative years of the company. This happened after Bill flew out and showed him System Writer. Despite the fact that selling an idea to Bruce was not easy, he became one of System Writer’s biggest fans, and wrote in his glowing review of it in Futures Magazine in 1989: “System Writer is the system trading software equivalent of putting a man on the moon.”
The big new features in System Writer Plus were enhancements to both charts and EasyLanguage. The feature of adding charts was not just for viewing prices, but they also allowed you to improve your system. Since System Writer put trading signals on the charts, you could view indicators and signals. This would allow a system designer to try and find ways to improve the system using the chart visuals. In addition, System Writer Plus used the Turbo Pascal (Borland) compiler under the hood, so the Easy Language code could be compiled and thus execute very fast. All of the Easy Language constructs were translated into Turbo Pascal. Another improvement was the concept of the signal. A signal was a given entry or exit rule. System Writer and System Writer Plus allowed you to combine multiple signals and optimize them over various parameters to develop your systems. The aspect that made this significant was that signals were reusable components.
During these early years Bill and Ralph traveled almost every weekend to spread the word about backtesting and System Writer. Also instrumental in spreading the gospel of system trading and backtesting was Charlie Wright, a famous trader and fund manager who gave many seminars with Bill and Ralph.
In 1991, Omega Research Launched TradeStation. TradeStation added intra-day analysis and also added a real-time aspect. This was a first as it finally allowed small traders to trade in real time. The importance of TradeStation to day-trading was akin to the importance of electricity to power the light bulb. It was the tool which brought day-trading to small-time traders, who were often just trading out of their home. During this time, traders would get intra-day data from satellite feeds. In the early 1990’s, Omega Research saved historical data that was available thought satellite feeds on TradeStation. Bill also had another vision at this time. He began saving tick by tick data when disk space was still very expensive as they envisioned that day-trading would become the most popular type of trading in the future. Day-trading successfully meant people would require the data he saved to do backtesting of intra-day strategies not only in various timeframes (e.g. 5 minute data), but also tick by tick data. In a way, Bill saw the future of real time and High Frequency Trading (HFT) in the same way that another Bill around this time saw that everyone would own a computer someday.
The next major breakthrough was in 1993 – a time when institutional vendors sold Forex and international data. Reuters approached them to buy out the company. Bill and Ralph were having so much fun with it, they refused saying that it was not for sale. Bill and Ralph told them they could license it and they said no. A few years later Dow Jones Telerate approached them and offered to buy them out. Once again Bill and Ralph would not sell and said no. A year later they were back and they licensed TradeStation. Dow Jones Telerate launched TradeStation as a premium service to institutional clients in 1996 which gave traders access to both Forex and international data for the first time.
In 1996 Sal Sredni joined the company as Vice President of Operations (eventually promoted to CEO when Bill and Ralph retired from the company in 2007). In 1997, Omega Research went public and renamed the company TradeStation. In 1999, TradeStation launched the online version, which proved to be a big step ahead as TradeStation was delivering data over the internet instead of requiring a satellite dish. Remember that back in the 1990’s, Bill was saving intra-day data. This was the reason. He foresaw this day and spent the money years before people even needed it to make sure he had the data when the time was right. Hence, in many ways, he is the Bill Gates of Intra-day trading.
Prior to 2001 when a system generated a trade you saw an alert. This changed when TradeStation added real time execution in TradeStation 6.0 and brought traders off the floor. In some ways this marked the end of pit trading and the birth of all electronic markets. Also in 2001, they launched TradeStation Securities. TradeStation 6.0 for institutional and active trader whose features such as custom strategy design and testing, automated trading and direct-access execution of stock trades, were made for the first time available over the internet in real time. In 2003, TradeStation 7.0 was released and offered execution of futures trades. Later that year they added forex analytics and execution. TradeStation 8.0 added options execution and in 2005, they become a self clearing firm for options.
In 2006, TradeStation Europe Limited was approved as an introducing broker by the UK Financial Services Authority (FSA). In 2007, the fundamental data was included in the historical database for strategy testing and integrated Forex execution was launched. In September of 2009, TradeStation Prime Services was launched. In 2010, TradeStation 9.0 and Eurex execution was launched. By the end of 2010, the company reported revenue of $129.0 million, net income of $11.4 million, client assets in excess of $2.3 billion with over 47,000 brokerage accounts. In 2011, Japan’s Monex Group acquired TradeStation Group. TradeStation also launched TradeStation Forex and acquired IBFX Holdings, LLC. In Barron’s review of online brokers, TradeStation earned the highest overall ranking of 4 ½ stars in 2012. Online web app for trading US Equities in Japan was also released.
Another aspect that made TradeStation special was the people. When looking back at the history of the company, it’s easy to see that they all loved what they were doing and the users of the product loved it. In addition, during the 1990’s, they also developed a third party solution provider network and I was one of the developers. Darla Tuttle, who ran the program in the 1990’s helped build this family. These addins made TradeStation even more popular not only due to the added functionality but also for providing livelihood for programmers and traders who created and sold them. It was nice that he even thanked me for what I did in helping make TradeStation popular during this interview. In fact during the mid to late 1990’s, Omega Research had their own magazine and I was on the cover and featured in an issue in 1998.
Bill and Ralph created a team and product which changed the face of trading. Bill had a vision when he saw the growth of real time trading and electronic markets. Indeed, this vision came true by paving the way for all electronic markets, including HFT trading.
This article is based the original notes from an interview Murray Ruggiero did with Bill Cruz and Salomon Sredni during July 2013, for part of his Futures Magazine article on the history of backtesting.