his book is well written and contains a great deal of information that is of value…." (The Technical Analyst,
From the Inside Flap
As an approach to research, technical analysis has suffered becauseit is a "discipline" practiced without discipline. In order fortechnical analysis to deliver useful knowledge that can be appliedto trading, it must evolve into a rigorous observational science.
Over the past two decades, numerous articles in respectedacademic journals have approached technical analysis in ascientifically rigorous and intellectually honest manner, and now,Evidence-Based Technical Analysis looks to continue downthis path. Organized into two parts, this valuable resource firstestablishes the methodological, philosophical, and statisticalfoundations of evidenced-based technical analysis (EBTA), and thendemonstrates this approach—by using twenty-five years ofhistorical data to test 6,400 binary buy/sell rules on the S&P500.
Evidence-Based Technical Analysis examines how you canapply the scientific method, and recently developed statisticaltests, to determine the true effectiveness of technical tradingsignals. Throughout these pages, expert David Aronson details thisnew type of technical analysis that—unlike traditionaltechnical analysis—is restricted to objective rules, whosehistorical profitability can be quantified and scrutinized.
Filled with in-depth insights and practical advice,Evidence-Based Technical Analysis provides you withcomprehensive coverage of this new methodology, which isspecifically designed for evaluating the performance ofrules/signals that are discovered by data mining. Experimentalresults presented in the book will show you that datamining—a process in which many rules are back-tested and thebest performing rules are selected—is an effective procedurefor discovering useful rules/signals. However, since the historicalperformance of the rules/signals discovered by data mining areupwardly biased, new statistical tests are required to makereasonable inferences about future profitability. Two such tests,one of which has never been discussed anywhere heretofore, aredescribed and illustrated.
If you want to use technical analysis to navigate today'smarkets, you must first abandon the subjective, interpretivemethods traditionally associated with this discipline, and embracean approach that is scientifically and statistically valid.Grounded in objective observation and statistical inference, EBTAis the approach to technical analysis you need to succeed in yourtrading endeavors.