Author, Trading System Developer
Program(s) Developed: Books and Articles on trading systems and Easylanguage
Interview Date: February, 2020
Interviewed by William Gallwas - President of Striker
Few professionals have witnessed the growth in futures trading systems like George Pruitt who has been loading and studying 3rd party trading systems since the 1990s. He has been a registered and licensed futures broker with NFA (ID 0234548) since March 12, 1991. We sat down with George days before his 29th year as a broker, educator, author, and developer.
William Gallwas: Tell us about your background, where you are located, a "day in the life" of George Pruitt. We recognize you as one of the industry's foremost professionals so we want to start the interview with a setting of about you. Married? Kids? Hobbies? Beer or wine? There might not be anyone else in the world that has loaded and studied as many trading system codes as you George so we want to understand how you keep up with it and stay active !
George Pruitt: Thanks for taking the time to interview me. I am married and have two children, ages 23 (daughter) and 28 (son). My son is a Exceptional Children teacher for the public school system and my daughter is currently living in Madrid teaching English to elementary school students. For many years I volunteered as basketball, softball and baseball coaches for my children. I coached them from the time they were four to sixteen. I know you spend a lot of time with your kids and hockey, William, and I believe the time I spent in this endeavor is my best trade ever! Both of my kids went on and became very successful athletes at the high school level. The love of team work and sports carried over into college as both were very involved with intramural sports. This foundation of team work and confidence has now carried over into their professional careers. Working as a coach was a wonderful and necessary distraction from trading. It gave me the ability to walk away from the markets and concentrate on other things. I know traders and managers that have an unhealthy connection to the markets - their lives follow the highs and lows of the markets. I live outside Asheville, NC on top of a mountain. This area is known for its beer (Beer City USA for several years.) Two large breweries Sierra Nevada and New Belgium are located here now and have provided resources to many of the smaller craft breweries. There are 20 breweries within 10 miles of where I am writing this. Other than drinking craft brews, I like to kayak, mountain bike and hike. There's nothing like drinking ice cold beer on a hot day in a kayak going down the French Broad river.
William Gallwas: We live in uncertain times and everyone wants to know what's going on and if move volatility lies ahead. You have a most interesting background since you have been in the industry since 1991 and seen a lot working in a brokerage firm, as a developer, as an author, and as a publisher. what do the charts and patterns suggest for 2020 ?
George Pruitt: The one thing you can count on is volatility. I am sure 2020 will follow the same volatile route we have seen over the last few years - you can count on that. The one thing we used to count on was the price of commodities rising - I mean they are limited resources right? I was around when you could simply apply a simple open range break out method to the markets or use a channel system and make a ton of money - it was like shooting fish in a barrel. Swing trading has become very difficult. I am still a friend of the trend and I think it will still be the way to go in the next few years. Mean reversion has worked with the bull market and day trading the stock indices is a nice way to diversify. Hedge funds and CTAs have had very difficult times since their last hurrah in 2014. Most CTAs that had great runs for years have seen their assets under management vanish and have experienced their worst draw downs ever. Its hard to beat this bull market. Things that have worked in the past should work again, but the old algorithms need something else. You can't pick a trend following algorithm and trade a huge portfolio and expect double digit returns. A smarter allocation process must be used with an eye on risk aversion.
William Gallwas: Having worked with many CTAs and System Developers over the years with your publication at Futures Truth, what characteristics make up a successful developer?
George Pruitt: A successful system developer is one that understands the risk of curve fitting and is available to his client base. If a person tries his best to offer a robust algorithm and is there to answer any questions from his clients, then I consider him a successful developer. Many developers have come and gone over the past ten years. Only a handful are still around. New developers have taken their place, but many haven't built the infrastructure to support their clients. All systems have draw downs and its nice to see a developer discuss this and show the results on a website - the good and the bad. I think the most important thing that distinguishes good developers is honesty. Honesty about their algorithms and honesty with their clients.
William Gallwas: 4. As an author, we understand you wrote a new book. Can you provide our readers an understanding of the content and how can we learn more and purchase?
George Pruitt: My latest book is Trend Following Systems - A DIY Project - Batteries Included: Can you reboot and fix yesterday's algorithms to work with today's markets? Here is a link to it on Amazon. https://www.amzn.com/1723499099 Creating a better mousetrap has always been my main impetus in working in this industry. I am not a market technician nor discretionary trader. I don't have John Hill's gifts, but I love computers and programming. This book is all about working with what I consider the best programming language ever, Python. Not just Python but the framework I created to back test trading ideas on daily bars. I wanted to be able to test many of the ideas that Keith Fitschen laid out in his book - Building Reliable Trading Systems. The concept that intrigued me the most was being able to back-test a diverse portfolio where you take only the first 1 or 2 markets in each sector and trade them and ignore the rest. Keith labeled this "First N in a group." This concept fits well with smaller accounts. So I created TradingSimula18 software and it comes a long with the book and you can test this very idea. I wanted to provide a book and software for less than $50 that could be used to help fix the algorithms of yesteryear. A sample of collected data from QUANDL is also included. Many trend following algorithms are also disclosed.
William Gallwas: The futures industry has been consolidating since 2008 and continues rapidly today. Rising compliance costs is the biggest reason, as you are in touch with brokers and know how clearing firms work - will this trend end soon? I know this is a broad question, but what are your sources saying how is the mood?
George Pruitt: Managed futures has seen better days. Cheap commission and around the clock trading has increased market efficiency. It definitely is much more difficult to find an edge, but an edge still exists and always will. Eventually buy and hold will falter and opportunities in commodities and futures will still be there. The small broker and small CTA must be given a break when it comes to compliance costs. It is absolutely staggering what one has to pay to just be in this business. Many have already walked out the exit door. Compliance costs should be commensurate with assets under management. A small CTA or CPO pays nearly the same costs as a multi-million $ asset manager.
William Gallwas: What other authors, books, websites, or blogs have been your biggest influence? Where do you go daily on the the internet for sincere, good market news reporting?
George Pruitt: If you want an encyclopedic view of the trading and the markets you can't go wrong with Perry Kaufman. Books by Toby Crabel, Robert Rotella, Keith Fitschen, Howard Bandy, John Ehlers, Alexander Elders, Kevin Davey, Connors/Raschke and Murray Ruggiero are worth the investment. Larry Williams book "Long Term Secrets to Short Term Trading" has good ideas. If you are interested in price action/patterns/supply-demand you should check out John Hill's books as well. TradingView is a neat website with free charts and interesting takes on the markets.
William Gallwas: The current stock market market boom, which started March 9, 2009, has enjoyed a whopping 500%+ gain for the S&P 500 through end of 2019. This record-long bull run also marks the best-performing one since World War II. We have known at Striker alot of developers call "the top" for the last few years but have been clearly wrong. Are you willing to make a prediction today in our Striker Report ? A top will eventually come, when do you think?
George Pruitt: Good question. I have known several traders lose a ton of money trying to short this market as it has marched up. I don't know when the top will be put in, but the best approach is to react and not predict. The market will tell us when its done. I don't think there will be a telltale sign before the eventual move down. Trading commodities in concert with the stock market is a great approach, I would think, for this "long in the tooth" bull run. There is still opportunities in commodity futures and futures.
William Gallwas: As a historian (as we know you are well read) do you think our leaders can continue to navigate the debit bubble or that our policy makers like the Fed can continue to keep us steady?
George Pruitt: Eventually debt will have an impact, but right now no one seems to care about it. I am not a big fan of Keynesian economics, but the perception that the Fed can control things does go a long way. Our leaders, Republican or Democrat, must always remember the tenets that have helped grow our economy to the best in the world. They must understand the need for growth and all the ramifications of that growth. Investments in more efficient technologies and education is an absolute must.
William Gallwas: What's going on with gold and other precious metals? We would like your opinion if investors should allocate a portion of their assets into gold and perhaps silver.
George Pruitt: A precious metal, GC or SI, should be in a portfolio if a trader can afford the allocation. There has always been a bullish perception to these markets - most traders have a hard time shorting and it has cost them. A symmetric system that eliminates this bias would be the way to go. However, most trading systems haven't performed well in this sector (over an extended period of time), but we never know the future. It is truly amazing the trading range we have been in over the past five years in silver.
This interview is for informational purposes only and is not intended to be
a solicitation of any kind. Trade only with risk capital. The risk of
trading can be substantial and each investor and/or trader must consider
whether trading systems are a suitable investment.
There is a risk of loss in trading. It is the nature of commodity and securities trading that where there is the opportunity for profit, there is also the risk of loss. Commodity trading involves a certain degree of risk, and may not be suitable for all investors. Derivative transactions, including futures, are complex and carry the risk of substantial losses. Past performance is not necessarily indicative of future results. Please read additional risk matters on our web site, www.striker.com. It is important you understand all the risks involved with trading, and you should only trade with risk capital. This communication is intended for the sole use of the intended recipient.
About this report The information and links on this website are for informational purposes. The risk of trading can be substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Striker is a member of the National Futures Association ("NFA"), the Managed Funds Association ("MFA"), and the National Introducing Broker Association ("NIBA"). Striker is registered with the Commodity Futures Trading Commission ("CFTC"), and was formerly registered with the Securities Exchange Commission ("SEC"). Additionally, Striker is a former member of the Financial Industry Regulatory Authority ("FINRA"), and the Securities Investor Protection Corporation ("SIPC"). FINRA is the largest non-governmental regulator for all securities business in the United States. Please read Striker Disclosure Statement for the additional disclosure.
The trading performance cited throughout our web site is based on actual trading history, unless otherwise noted. The starting account balance is based on the system developer recommendation. Striker tracks actual performance by recording and maintaining each trade ticket for each system generated. The performance information assumes that no additions or withdrawals have been made. The rate of return for all systems disclosed in the Striker Report is cumulative from the day the system actually started trading at Striker. We maintain a "life" track for all 3rd party systems. We do not necessarily base our records on any particular client account. No one particular customer has achieved these results. The percentage returns reflect inclusion of commissions and fees.The actual percentage gains/losses experienced by investors will vary depending on many factors, including, but not limited to: starting account balances, market behavior, the duration and extent of investor participation (whether or not a client takes all signals for a system) in the specified system and money management techniques.
Striker is a revolutionary concept in action: an international, professional team of brokers dedicated to trading only for clients. It bears repeating: unlike most other brokers, Striker does NOT trade futures for itself or any of its employees. This policy has been in place from the start in order to guarantee that our entire focus remains on the interests of our clientele. Striker believes that when brokers are allowed to trade for themselves (or have in-house trading practices) there is a strong potential for conflict of interest, as the broker may place more importance on his own trading activities (or that of his firm's) than on those of his clients. Finally, Striker has no financial ties to system developers, so there no bias or pressure on how we report the actual trading results posted in our client section. This section is designed specifically for Striker's clients, so they may audit their results on a daily, weekly, monthly, or annual basis.