The Louis Mendelsohn Story
The effects of Louis Mendelsohn’s research and application of computing technologies on technical analysis and the trading world are immeasurable. He pioneered the application of personal computers to the financial markets and has been at the forefront of the trading software industry since the late 1970’s.
Mr. Mendelsohn’s rags-to-riches life is tied inextricably to the invention of personal computers, his application of trading software to technical analysis, the transition of previously domestic financial markets into highly intertwined global markets and the emergence of today’s multi-million dollar technical analysis trading software industry. However, his adult life is a far cry from the public housing project in Providence, Rhode Island where he was born in 1948, and the triple-decker tenement house (adjacent to railroad tracks where freight trains passed) that was his childhood home in the 1950’s.
As the son of a high school dropout, Mr. Mendelsohn was encouraged by his father to go to college and get an education. After graduating from high school in 1965 Mr. Mendelsohn attended Carnegie Mellon University where he received a B.S. degree in Administration and Management Science in 1969. Later he was awarded an M.S.W. degree from the State University of New York at Buffalo in 1973, and an M.B.A. degree with Honors from Boston University in 1977.
An electronic epiphany
Throughout his time in graduate school beginning in 1971, Mr. Mendelsohn traded equities and stock options. He analyzed the markets with hand drawn charts and computed technical indicators like moving averages by hand and later with a hand-held calculator.
Years later in 1977, while working professionally as a hospital administrator in Florida, he tinkered with one of the first personal computers and had an epiphany. He realized that technical analysis and trading would be revolutionized by trading software to help traders like himself make more profitable trading decisions. He immediately began applying personal computers to technical analysis and switched to trading commodities which afforded him greater leverage and higher profit potential.
The Genesis of the Company
Mr. Mendelsohn formed Vantagepoint ai two years later in 1979 for the purpose of licensing the trading software that he developed for himself to other commodities traders. Just after his 32nd birthday, and no stranger to taking risks, he took the plunge and left hospital administration to devote full time (90-100 hours a week) trading commodities and developing technical analysis trading software for the commodities futures markets.
Louis Mendelsohn led, others followed
In May 1983, Darrell Jobman, then editor-in-chief of Futures magazine (which at the time was the premier source of technical analysis exclusively for commodities futures traders) published the first article of a series of three ground-breaking articles authored by Mr. Mendelsohn, in which he introduced the concept of strategy back testing for personal computers. Even before his third article was published in the December 1983 issue, Mr. Mendelsohn stunned the financial industry with the release of his ProfitTaker Futures Trading Software, the world’s first commercially available strategy back-testing software for personal computers.
Almost overnight ProfitTaker brought Mr. Mendelsohn worldwide recognition and fame as one of the first pioneers to apply personal computers and trading software to technical analysis and the very first person to introduce back testing into trading software for personal computers.
Leading the back testing revolution
Many early ProfitTaker users and other traders tinkering for the first time with computers and trading software realized the profound impact that strategy back testing would have on technical analysis and ProfitTaker became the gold standard by which all subsequent programs would be judged.
Quickly, Mr. Mendelsohn’s strategy back-testing approach (at the time patents were not granted for computer software processes) was adopted by others who began to develop their own commercial trading software programs modeled after ProfitTaker. These included the Volatility Breakout System released in 1987 by two early ProfitTaker customers who Mr. Mendelsohn had introduced to each other years earlier, and TradeStation® which was released in 1991, to name just two.
As a result, Mr. Mendelsohn was instrumental in transforming technical analysis from its earlier pre-computer days into a multi-million dollar trading software industry that now includes a number of publicly traded companies.
The Globalization of the Financial Markets
In the mid-1980’s, Mr. Mendelsohn began to notice structural changes occurring within the global financial markets. This phenomenon involved the dynamic interconnections between related global markets that he believed, if quantified and incorporated into computerized trading strategies, had the potential to totally transform technical analysis, from its historically narrow, single market focus of analyzing each individual market by itself, into a broader, global, multi-market or ‘intermarket’ analytic framework.
The more he delved into this phenomenon involving these interconnections between markets, the more he realized that the prevailing single market technical analysis approaches and the lagging indicators still being used would soon become outdated and obsolete as the ‘globalization’ of the financial markets continued to accelerate.
Global Markets require a new approach
|By 1986 Mr. Mendelsohn began developing an entirely new approach to computerized technical analysis for this new global environment, so that he and his trading software customers could maintain their competitive edge and outperform other traders still limited to analyzing each individual market in isolation. His research focused on the quantification of global market data related to the intertwined dynamics taking place between related markets including crude oil, gold, currencies, interest rates, stock indices and other physical commodities. The goal was to create leading technical indicators that could give traders an advanced warning of impending trend changes before they actually occur.
Amid the global turmoil following the October 1987 stock market crash, while Mr. Mendelsohn’s competitors were still playing catch-up developing their own back testing software to compete with ProfitTaker, Mr. Mendelsohn broke new ground in computerized technical analysis for the second time in less than five years when he unveiled the first commercial intermarket analysis software in the world for PCs that analyzed the global interconnections of financial markets and provided trend direction forecasts that were based on how the markets affected each other.
Outdated Single Market Analysis and Lagging Indicators Lead to Trading Losses and Disappointment
|Mr. Mendelsohn’s legacy as a leading pioneer in trading software development since the 1970’s is widely recognized in the financial industry. John Murphy, noted technical analyst wrote in his landmark textbook Technical Analysis of the Financial Markets, “Louis Mendelsohn was the first person to develop intermarket analysis software in the financial industry during the 1980’s. Mendelsohn is the leading pioneer in the application of microcomputer software and neural networks to intermarket analysis”.
|As the markets continued to become increasingly more interconnected, evidenced by the October, 1989 global aftershock, Mr. Mendelsohn, intent on finding a robust way of capturing these intermarket dynamics, developed his second generation intermarket trading software. This effort would overcome the limitations of single market technical analysis and address the intertwined nature of the global markets using proprietary mathematical processes that apply artificial intelligence neural network pattern recognition to intermarket analysis. The result of this research was VantagePoint, the first commercially available artificial intelligence-based intermarket analysis software released by Mr. Mendelsohn in 1991 that uses the pattern recognition capabilities of neural networks to find hidden relationships in global data and to forecast the future price action and trend direction of hundreds of markets worldwide with uncanny predictive accuracy.
Patented Technologies and their Practical Application Cements Mendelsohn’s Legacy
Since the 1980’s Mendelsohn has been collaborating with his research team, the Predictive Technologies Group, to delve deeper into the application of neural networks to intermarket analysis. Throughout this time, his team of scientists, engineers and programmers have continued to refine and expand VantagePoint’s functionality and increase its predictive accuracy, while continuing to license it to traders all over the world.
On May 14, 2013 Mendelsohn was granted Patent Number 8,442,891 by the U.S. Patent Office, covering his proprietary computerized processes for applying neural networks to intermarket data. His second patent, Patent Number 8,560,420, involving his invention of predictive technical indicators that can forecast trends and changes in trend direction, was granted to him on October 15, 2013.
The Financial Markets are Forever Changed
Mr. Mendelsohn has continued to be the driving force behind innovations in technical analysis trading software, in which he has implemented intermarket analysis through the use of neural network pattern recognition to create leading technical indicators that now forecast hundreds of global financial markets daily.
He has authored numerous articles and editorials since the 1980s in financial magazines warning about the risks that derivatives pose to the stability of the global financial system and the likelihood of frequent and increasingly more severe global financial crises. In fact, in November 2007 SFO magazine published a front cover article authored by him which warned that a global meltdown was imminent, after he had moved millions of dollars of financial assets that he controlled into U.S. Treasuries as a precautionary measure, thereby avoiding the subsequent financial carnage that caught many other traders and investors off guard.
As a result of his profound influence on technical analysis trading software development, involving both strategy back-testing and intermarket analysis, Mr. Mendelsohn is considered the single most influential person in technical analysis trading software development in the world since the introduction of personal computers in the 1970’s. In the early 1990’s his biography was selected for inclusion in Who’s Who in the World, Who’s Who in America, and Who’s Who in Finance and Industry. Years later, in 2001, his biography was included in the National Millennium Time Capsule in Washington, D.C. buried for the next 100 years, to chronicle the lives of the highest achievers and most influential American thought-leaders of the 20th century. Most recently, Mr. Mendelsohn was honored to receive the Lifetime Achievement Award from Who’s Who.
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