Best for professional, intellectual and philosophical trading system developers

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	• Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals David R Aronson Wiley, 2006 - 544 pages average customer review:based on 41 reviews view larger image
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highly recommended

Best for professional, intellectual and philosophical trading system developers

I had thought of using another review title "For fans and followers of Victor Niederhoffer" as inspired by his praise on the front cover. Pardon me to assume the following: if you had not heard of Niederhoffer, the chance is high that you have no prior experience/idea of testing the statistical significance of various TA tools, nor dwelling into the philosophical/scientific aspects of TA at all. Please accept the fact that this book is not for you. For trading professionals who deem themselves philosophical and intellectual (preferably with a college level of knowledge on statistics), this book is an inspiration. Highly recommended!

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A must-have for TA practitioners

This book shakes some of your most deep beliefs in TA - and this is a healthy thing. Read it with an open mind.

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Great! addition to the Technical Analysis field

I do not have a PhD in statistics and no I do not work on Wall Street. Therefore, when I read a negative review of the book by ShanShan WU "sswu", I automatically assumed both of the writer of the review. So I write this review for the other tens of thousands of us that do not have a PhD in statistics and that use computing power and models in our attempts to predict the market. As well, this book is a must-read for any fund manager that employs quantatively-based hedge funds. From this book, a manager can gather enough knowledge to ask the right questions of the producers of a model.

Most importantly, for the astute investor that previews back tested data of a model for which he or she may invest, and expects that the fund will continue to display the same returns into the future, this book is a must-read. From the reading of this book, the investor will gather enough knowledge to ask the tough questions of the creator of the fund.

The book is well written and David Aronson does an admirable job of taking what some might consider a "dry subject", and turning it into a story of progress. The technical analysis field is filled with books and books on how to "beat the markets" with trading systems - trend-based, momentum trading, rules-based, you name it. But most, if not all of those books, lack an important element - statistical measures that can instill confidence in the system or more importantly, show the system to be a "fraud." Aronson's book - as a book and not a scholarly paper - breaks this continuing and long-held belief in dogma of technical analysis. Therefore, some may through spears at his work.

Most of us that build automated trading systems (or invest in) want to have some degree of confidence in our system or model. Therefore we must turn to statistical measures. We can do it sooner or we can do it later -- but we must do it. For those that have not turned to statistical measures on their model, they may lose confidence in their system as the tide turns - as it always does. Aronson lays out reasons for turning to statistical methods and as well, some of the basic means of doing so. For those that build the systems, the steps are clear enough to actually build the code for doing so. For the managers that employ model-builders or for those that must choose between competing systems, this book exposes some of the basic methodologies that a manager should expect from a model. And it does so as a wonderful "read."

For technical analysis-based traders, this is not the book for you - unless (and this is a big "unless") - you want to rethink how and why you trade with TA based signals. Of course, if your system of trading wanes greatly at times and you lose confidence, this book will be both a wakeup call and a demarcation for a new direction. If you are a trader, do not expect a quick and easy fix for your system - although it may offer you that just as luck may offer you some good trades. Instead, expect that the book will offer very insightful methodologies that will take some work on your part.

This book is at the head of the list for summer reading for the truly diligent investor, trader, model-builder, or fund manager for which technical analysis or quantative measures are a part of a part of the decision-making.

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The Death of Subjective Analysis

Aronson's book helps the reader move past using gut-level "intuition" towards using objective measures to assess the performance of stock market indicators. During this process, Aronson provides the reader with the following:

1) A detailed, well-researched overview of applying the scientific method to draw conclusions from market data.
2) A methodology to systematically data mine market data.
3) An example of this methodology in practice.

One should note that this book has a broader range of applications than the title might suggest.

Also, a basic understanding of statistics, markets and indicators is needed for the reader to benefit from this book.

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Galileo or the Church - the choice is yours

The reviews for this text encompass the full gamut of responses. At one end reviewers complain that the text does not offer a system or even ideas about how to make money; in fact, elements of the text identify and characterize the challenges inherent in profittable trading. At the other end are reviewers who praise the book for enlightening them and changing how they approach trading.

A medical analogy may serve to decribe these disparate responses. Some patients with terminal cancer don't want to be told; instead, they wish to live out their remaining time in ignorance so they may enjoy themselves. An entirely understandable and human response. Others want to understand what modern medicine has to say about their condition. They want this information in order to make informed decisions. This text places the practitioners of TA in the position of our unlucky patient.

Essentially, the text has taken what can be described as a scientific approach towards evaluating TA. The results are both enlightenting and sobering for those with an open mind and the willingness to think. In no way does the text state that TA cannot be used to trade profittably. Quite the opposite; the author provides an unqualified yes in this regard. On the other hand, he also provides real data about the pitfalls and problems inherent in the development of an automated trading system.

Personally, I prefer to have as much information as possible when I'm betting and I found the book increased the quality of my thought process. Five stars and money well spent.

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reviews: 1, 2, 3, page 4, 5, 6, 7, 8, 9

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