Evidence-Based Technical Analysis is a breakthrough book in that it rigorously applies science and statistics to determine the effectiveness of technical analysis in forecasting markets and providing profitable trading signals. Technical analysis as it is practiced today has more similarities with a faith-based folk art than a scientifically-based practice, the author asserts. To move technical analysis forward, the author proposes a new type of technical analysis, which he calls: evidence-based technical analysis. EBTA differs from traditional technical analysis in that it is restricted to objective technical methods which can be historically tested in a manner that provides solid evidence of the methods predictive value. The author provides a methodology for testing technical systems and trading tools. Most importantly, the author tests over 4000 trading signals and trading rules to determine which signals/rules generate profitable signals and which do not. 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 stimulate them to develop new systems utilizing the best-performing signals and rules.
Book Details:
- Author: David Aronson
- ISBN: 9780470008744
- Year Published: 2007
- Pages: 544
- BISAC: BUS027000, BUSINESS & ECONOMICS/Finance
About the Book and Topic:
Evidence-Based Technical Analysis is a breakthrough book in that it rigorously applies science and statistics to determine the effectiveness of technical analysis in forecasting markets and providing profitable trading signals. Technical analysis as it is practiced today has more similarities with a faith-based folk art than a scientifically-based practice, the author asserts. To move technical analysis forward, the author proposes a new type of technical analysis, which he calls: evidence-based technical analysis. EBTA differs from traditional technical analysis in that it is restricted to objective technical methods which can be historically tested in a manner that provides solid evidence of the methods predictive value. The author provides a methodology for testing technical systems and trading tools. Most importantly, the author tests over 4000 trading signals and trading rules to determine which signals/rules generate profitable signals and which do not. 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 stimulate them to develop new systems utilizing the best-performing signals and rules.
Technical analysis attempts to discover patterns in past price movements in order to forecast future price movements. There are a number of different approaches to technical analysis, including: chart patterns, volume analysis, momentum analysis, Elliott Wave, point and figure, Dow Theory, channels, sentiment, flow of funds, and intermarket analysis. In general, most technical analysis approaches involve a mixture of objective and subjective analysis. As a result, no single approach has been proven to consistently forecast the market accurately or to consistently generate profitable trading signals. Most technicians/traders create an individualized approach to trading/analysis by using a mixture of different technical analysis methods. Again, no single combined approach has demonstrably proved to consistently outperform the market. The lack of evidence that technical analysis actually works has hindered the acceptance and use of technical analysis in many sectors of the financial and investment world.
Provocative book. The book will challenge the assumptions and practices of traders and technical analysts, and point the way to improved analysis and trading. Authoritatively identifies profitable approaches. The author tests over 4000 technical signals/rules and identifies those that work best, a feature that will appeal to all levels of traders. Author platform. The author regularly speaks at industry conferences and writes for industry publications. He is well-known and respected figure in the technical analysis community. Provides system testing methodology. The author demonstrates the fallacies in historical testing practices and points the way to a methodology that will improve the chances of creating a strategy that works in the future.
About the Author
David Aronson (New York, NY) is an adjunct professor at Baruch College where he teaches technical analysis. He is a Chartered Market Technician and has written and published a number of articles on technical analysis. Previously, he was a proprietary trader and technical analyst for Spear Leeds & Kellogg. He founded Raden Research Group, a firm which was an early adopter in the use of artificial intelligence, machine learning, and data mining for forecasting financial markets. Prior to that, he founded AdvoCom, a firm which specialized in the evaluation of commodity money managers and hedge funds, their performance, and trading methods.