A new (and needed) approach to technical analysis.

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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

The Real Thing

Think of Evidence-Based Technical Analysis as a book for the dedicated, not intended for the coffee table or intellectual nambies. Yes, there's lighter moments: Professor Aronson sprinkles witticisms and quotes from William Burroughs' Naked Lunch. But basicly this is a primer on data- based technical analysis AND a synopsis on the rise of Western scientific reasoning. We'll navigate through, among others, Aristotle, Descartes, Hume and Karl Popper. We'll focus a microscope on data mining and hopefully learn how to test our market theories and make more money. Don't rush through. Allow time.

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A New Direction

David Aronson's book has set the tone, if not the parameters, of a new conversation among technicians and other interested observers. Whether technical market analysis ultimately yields to Aronson's rigorous standards remains to be seen, but he has placed a high bar to admission into the dialogue. As a result, much nonsense which now passes for TA is certain to be marginalized, by itself an important contribution.

Aronson's suggestion that TA's best chance for survival lies in a human-computer partnership is right and strikes a hopeful note.

This challenging book is a tonic which should be taken fully by any serious student of the markets. An excellent book and a much-needed contribution to our dismal science.

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Excellent

David Aronson persuasively presents his case - the scientific method and proper statistical evaluations must be applied to technical analysis in order to assure its relevance. Most technical indicators and concepts are subjective and untrustworthy as they lack predictive power. Objective technical methods are better because they can be tested to see if they contain the legitimate knowledge and predictive power we seek. But evidence-based technical analysis (EBTA) goes further. Reports of profitable back tested results are not enough because testing which has not taken into account data mining biases or that shades statistical methods can produce deceptive or mediocre results.

The value of this book will be reinforced by the future research of supporters of EBTA. Critics of EBTA will declare that technical analysis is more art than science. Aronson exposes the weakness of that claim by showing how statistical methods can be applied to commonly used technical indicators, taking into account the data-mining biases he so well describes, to seek trading signals with statistically significant returns. He shares his results in Part II of the book.

This book is well-written and organized. Aronson's lifetime pursuit of intellectual honesty is evident, and his Wall Street experience is solid. Numerous footnotes stimulate further study.

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Must Have

I pre-ordered this work months before its release based on the fact that I was enamored with data mining and its applications to futures trading and I believed this work would benefit my system.

The book starts by saying that "much of popular or traditional technical analysis stands where medicine stood before it evolved from a faith-based folk art into a practice based on science". Fortunately, I was not crushed by this premise and in fact totally agreed with it. There were unending affirmations of my thoughts that suggested most systems I've seen were based on erroneous beliefs. What if the popular version of technical analysis does not qualify as legitimate knowledge? A diminished if not wiped out trading account, that's what. We all know of the many failed systems and approaches to trading that lost us money and the follow-up fantasies as to why. `Why' is the question that is answered in this book!

EBTA charts the course from those anecdotal `systems' to objective statistical evidence based systems. From the introduction I was hooked, completed my reading within two days, and was much more than satisfied at its conclusion. I was ecstatic! I've started reading it again, but now I want more!

This work provides ample explanations and tools to assist in developing a scientific approach to developing trading systems through a wide variety of data mining methods. I enjoyed this work immensely. I always enjoy turning the light on and seeing the truth.

This book delivers and it is very entertaining reading.

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A new (and needed) approach to technical analysis.

Professor Aronson's book is a fascinating read for anyone frustrated with the current state of technical research and a must-read for those new to the field. I believe the Market Technicians Association should include it in its Chartered Market Technician curriculum.

After a few years of studying and using technical analysis, I was left with the distinct feeling that there was an elephant in the room: most of the methods used by market technicians haven't been rigorously examined for risk-adjusted performance. Elaborate and often contradictory theories and strategies have been presented by saying "my personal experience has been..." or something similar. Eventually, TA began to seem more a religious choice rather than a science of observing and predicting the markets (let alone successful investing).

Aronson's book follows a structure that is designed to break through generations of instruction from pontificating gurus. He discusses the reason TA's rules are suspect, provides a brief history of empiricism ("the scientific method") and then delves into descriptive and inductive statistics to move the field forward. Those readers fortunate enough to have an undergraduate background in philosophy and statistics will find the reading somewhat basic but the application of these fields to a critical appraisal of TA refreshing. Finally, he applies his rigorous testing to a large set of TA rules.

Key takeaway: The way to develop and test strategies going forward.

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

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