The Best TA Book Ever Published!!

Discussion in 'Educational Resources' started by marketsurfer, Oct 25, 2006.

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  1. Recently, I obtained an advance copy of "Evidence Based Technical Analysis" by David Aronson. It is by far the best TA book ever published. Finally, someone cut through the mystery and nonsense yet presents a scientifically valid approach to using TA as a trading tool. I was happily surprised to see these truths revealed for the first time in a mass market trading book. This book destroys the TA myths, yet shows how it can be used in a statistically valid manner. It topples long held beliefs and is a must read for anyone interested in trading.

    Here's some of the review from Amazon:

    <i>Editorial Reviews

    Book Description
    Evidence-Based Technical Analysis is a breakthrough book in that it rigorously applies the scientific method and recently developed statistical tests to determine the true effectiveness of trading strategies, rules or systems discovered by data mining. Traditional technical analysis – as currently practiced – is more like a faith-based folk art than a science, the author asserts. These subjective interpretive methods cannot be back-tested or evaluated, yet many believe that they are effective. The author explains that because of various cognitive biases and illusions, such as hindsight bias, illusory correlations, etc., people often adopt beliefs that are unsupported by evidence or even contradicted by evidence. For example, the famous head and shoulders pattern – a cornerstone of traditional TA when tested objectively – has been shown to have no predictive power. Yet many TA texts and most TA experts believe in the pattern’s efficacy. To move technical analysis forward, the author proposes a new type of technical analysis, which he calls: evidence-based technical analysis or EBTA. Unlike traditional technical analysis, EBTA is restricted to objective methods whose historical profitability can be quantified and then rigorously scrutinized. The author provides a new statistical methodology specifically designed for evaluating the performance of rules that are discovered by data mining, a process in which many rules are back-tested and the best performing rule(s) is selected. Experimental results presented in the book show that data mining is an effective approach for discovering useful rules. However, the historical performance of the best rule (s) is upwardly biased - a combined effect of randomness and data mining. Thus new statistical tests are needed to make reasonable inferences about the future profitability of rules discovered by data mining. Most importantly, in a data mining case study the author evaluates more than 6,400 signaling rules applied to the S&P500 Index using these new tests. For technical analysts and traders, the book is a wake-up call to abandon subjective, interpretive methods and embrace an approach that is scientifically and statistically valid. For other traders, the rigorous testing of trading signals/rules may make their data mining efforts more productive and stimulate the development of new systems, signaling rules. </i>

  2. This book sounds intriguing to say the least. I have never had any faith in subjective analysis of market charts simply because the traditional claims of technical chartists remain unproven statistically.

    I look forward to getting my hands on this book.


  3. cool. you will not be disappointed.


  4. Backtesting is like trendfollowing, it works until it doesn't.

    At least now you'll have more reason to get frustrated when the TA fails, compared to when you kinda "knew" it was voodoo. Maybe pull more stops? :)

    JMO, don't pay any attention to me.
  5. Thanks for the heads-up, surf. As a PhD-trained statistician (ABD) in a former life :p , I look forward to this. There have been a few papers over the years, attempting to apply statistical methods to TA. However, they've been written mostly by academics, and, with maybe a couple of exceptions, generally neither well-designed nor useful. By contrast, this guy is obviously hands-on: a long-time systematic trading practitioner, a technician (CMT), a very early fund-of-funds entrepreneur (nice...), and only recently an adjunct prof (from his bio).

    You can find his bio on his small, non-commercial website, . It also has a free pdf paper, Monte Carlo Permutation Evaluation of Trading Systems (2006), with the algorithm / code for testing those data-mined rules. It's by Timothy Masters, probably this one. Haven't read it yet, but am going to.
  6. I see the price is off by 37%, should I wait for further reductions?
  7. thanks for the info and data! i truly believe this book will revolutionize the way TA is viewed and used. looking forward to hearing your opinion after your read.


  8. Bulkowski put out a book where he statistically tested different chart patterns in different market environments and tested breakouts and average moves and failures.

    Is this the same thing but instead of chart patterns it is TA indicators?
  9. Drew07


    I'm new to technical analysis, is this book too complex for me at this point?
  10. no, i wish i would have had this when i first started--it will teach you the right way to think about TA--which is critical so you dont waste time.

    #10     Oct 25, 2006
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