{"id":6162,"date":"2025-08-28T06:35:22","date_gmt":"2025-08-28T06:35:22","guid":{"rendered":"https:\/\/fxex4.com\/shop\/product\/evidence-based-technical-analysis\/"},"modified":"2025-08-28T08:13:22","modified_gmt":"2025-08-28T08:13:22","slug":"evidence-based-technical-analysis","status":"publish","type":"product","link":"https:\/\/fxex4.com\/shop\/product\/evidence-based-technical-analysis\/","title":{"rendered":"Evidence Based Technical Analysis"},"content":{"rendered":"

Original website:<\/strong>\u00a0<\/span>https:\/\/www.wiley.com\/en-us\/Evidence+Based+Technical+Analysis:+Applying+the+Scientific+Method+and+Statistical+Inference+to+Trading+Signals-p-9780470008744<\/p>\n

Original price:<\/strong>\u00a0<\/span>$110<\/p>\n

Content:<\/strong>\u00a0<\/span>Evidence-Based Technical Analysis.pdf<\/p>\n

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What you take-away from a reading of this book really depends on where you\u2019re coming from.<\/p>\n

For STATITICIANS with an interest in trading markets\u2013You\u2019ll likely walk away with the feeling: \u201cYeah, that\u2019s what I\u2019ve been thinking for years, nice to see someone took the time to debunk the TA myth.\u201d<\/p>\n

For TECHNICIANS (traders) with an interest in statistics\u2013You\u2019ll likely walk away thinking \u201cYou gotta be kidding. There are a hundred good books which can show you how to use TA to make money. This book sucks.\u201d<\/p>\n

Aronson suggests that the truth does NOT lie in between\u2013 He is firmly in the camp of the Statistician.<\/p>\n

But a close reading of this powerful book does not \u201cclose the door\u201d on profitable TA, it simply confirms what every first-year MBA learns:<\/p>\n

\u201cNo OBJECTIVE black-box trading strategy CONSISTENTLY beats the market AVERAGES over the LONG TERM.\u201d<\/p>\n

But hard-core TA fans take heart. You will find something interesting in this book also. I\u2019m certain Aronson would agree with the following:<\/p>\n

\u201cSure you can add COMPLEX rules to the black-box, and PERIODICALLY find runs of profitability with TA. If EXCESS returns exist only in the SHORT TERM, hey, that\u2019s good enough for me.\u201d<\/p>\n

For those not willing to take the time to digest the painstakingly presented statistical concepts, there will be little value in this book\u2013 This is a serious study with lots of math. Its not hard math. But math best understood after fully internalizing a college level stats class.<\/p>\n

Even for those with a Stats or Econometrics degree statistics are tough\u2013both computing and interpreting statistical data takes a little work. To complicate the issue, market-related statistics are fraught with half-truths, mind-bending math, and wall-street lore.<\/p>\n

This book goes a long way to put bogus TA lore to rest by presenting a clear, scientifically sound procedure to test Technical rules.<\/p>\n

For those seriously considering buying this book let me suggest that you find Aronson\u2019s website [\u2026] and download and read Dr. Timothy Masters\u2019 .pdf \u201cMonte-Carlo Evaluation of Trading Systems.\u201d The document, both in tone, and sophistication, mirrors Aronson\u2019s book.<\/p>\n

If you like Masters\u2019 43 page doc\u2013you will love Aronson\u2019s 500+ page book.<\/p>\n

The Review<\/p>\n

I break the book up into four parts, each with various degrees of usefulness depending on your background\u2013ie: Technician or Statistician. Below, I\u2019ll simply give what I thought was the \u201cmoney-quote\u201d from each part, plus a couple of observations for those considering buying the book.<\/p>\n

***** Part 1: Chapter 1 \u2013 31 pages
Objective Rules and Their Evaluation<\/p>\n

\u201cThe isolated fact that a rule earned 10 percent rate of return in a back test is meaningless. If many other rules earned over 30 percent on the same data, 10 percent would indicate inferiority, whereas if all other rules were barely profitable, 10 percent might indicate superiority.\u201d \u2013 Aronson, page 23<\/p>\n

Constructing Rules \u2013 Intro to bi-modal rule construction and trigger thresholds
Data Transformation \u2013 Nice review of position-bias, log-differences and testing biases
Benchmarking Rules \u2013 Good review of why \u201cRelative-Benchmarking\u201d is important
Beating the Benchmark \u2013 Why a profitable back test is not conclusive proof of good rule<\/p>\n

***** Part 2: Chapters 2-3 \u2013 130 pages
The Illusory Validity of Subjective Technical Analysis
The Scientific Method and Technical Analysis<\/p>\n

\u201cStatistician Harry Roberts said that technical analysts fall victim to illusion of patters and trends for two possible reasons. First, the \u201cusual method of graphing stock prices gives a picture of successive (price) levels rather than of price changes and levels can give an artificial appearance of pattern or trend. Second, chance behavior itself produces patterns that invite spurious interpretations\u201d\u201d\u2013 Aronson, page 83<\/p>\n

The Eye Deceives \u2013 Charting a random process and the representativeness heuristic
Subjective vs. Objective \u2014 Why its important to be able to \u201chard-code\u201d a TA rule
The Role of Logic \u2013 Why \u201cFalsification\u201d is more important than \u201cAffirmation\u201d in TA
Astrology vs Astronomy \u2013 Pushing the TA boundaries from pseudo- to science<\/p>\n

***** Part 3: Chapter 4-7 \u2013 230 pages
Statistical Analysis
Hypothesis Tests and Confidence Intervals
Data-Mining Bias: The Fool\u2019s Gold of Objective TA
Theories of Non-Random Price Motion<\/p>\n

\u201cInformal data analysis is simply not up to the task of extracting valid knowledge from financial markets. The data blossoms with illusionary patterns whereas valid patterns are veiled by noise and complexity. Rigorous statistical analysis is far better suited to this difficult task.\u201d \u2013 Aronson, page 172<\/p>\n

Hypothesis Testing\u2013Good review of probability and statistical inference
The Traditional Solution \u2013 Actually put your college-level stats knowledge to use
The Monte-Carlo Solution \u2013 Putting computer randomization and re-sampling to work
The Data-Mining Problem \u2014 Why traditional MC solutions don\u2019t work
Inefficient Markets \u2013 How, where and why profitable TA rules should STILL exist<\/p>\n

***** Part 4: Chapter 8-9 \u2013 100 pages
Case Study of Rule Data Mining for the S&P 500
Case Study Results and the Future of TA<\/p>\n

\u201cFew rule studies in popular TA apply significance tests of any sort. Thus, they do not address the possibility that rule profits may be due to ordinary sampling error. This is a serious omission, which is easily corrected by applying ordinary hypothesis tests.\u201d \u2013 Aronson. page 449<\/p>\n

The Operators \u2013 Reviews: channel-break-outs, moving averages, channel-normalization
The Indicators \u2014 Reviews: price, volume, breadth, spreads, yields
The Rules \u2013 Reviews: trends, inverse trends, reversions, divergence
The Results \u2013 Analysis of why 0 of the 6,402 tested rules produced no significant results<\/p>\n

The Bottom Line<\/p>\n

Aronson\u2019s book reminds me of that masked-magician on TV who has given away the secrets to all the best stage illusions.<\/p>\n

Novice magicians and apprentice conjurers will undoubtedly be \u201cpissed-off.\u201d<\/p>\n

But true professionals are liberated.<\/p>\n

The best in the field can focus on new and potentially MORE exciting illusions\u2013not the same old tricks.<\/p>\n","protected":false},"excerpt":{"rendered":"

Original website:\u00a0https:\/\/www.wiley.com\/en-us\/Evidence+Based+Technical+Analysis:+Applying+the+Scientific+Method+and+Statistical+Inference+to+Trading+Signals-p-9780470008744 Original price:\u00a0$110 Content:\u00a0Evidence-Based Technical Analysis.pdf \u00a0\u00a0 What you take-away from a reading of this book really depends on where you\u2019re coming from. For STATITICIANS with an interest in trading markets\u2013You\u2019ll likely walk away with the feeling: \u201cYeah, that\u2019s what I\u2019ve been thinking for years, nice to see someone took the time to debunk […]<\/p>\n","protected":false},"featured_media":6166,"template":"","meta":[],"product_brand":[],"product_cat":[729],"product_tag":[],"class_list":{"0":"post-6162","1":"product","2":"type-product","3":"status-publish","4":"has-post-thumbnail","6":"product_cat-courses","8":"first","9":"instock","10":"sale","11":"shipping-taxable","12":"purchasable","13":"product-type-simple"},"_links":{"self":[{"href":"https:\/\/fxex4.com\/shop\/wp-json\/wp\/v2\/product\/6162","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fxex4.com\/shop\/wp-json\/wp\/v2\/product"}],"about":[{"href":"https:\/\/fxex4.com\/shop\/wp-json\/wp\/v2\/types\/product"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/fxex4.com\/shop\/wp-json\/wp\/v2\/media\/6166"}],"wp:attachment":[{"href":"https:\/\/fxex4.com\/shop\/wp-json\/wp\/v2\/media?parent=6162"}],"wp:term":[{"taxonomy":"product_brand","embeddable":true,"href":"https:\/\/fxex4.com\/shop\/wp-json\/wp\/v2\/product_brand?post=6162"},{"taxonomy":"product_cat","embeddable":true,"href":"https:\/\/fxex4.com\/shop\/wp-json\/wp\/v2\/product_cat?post=6162"},{"taxonomy":"product_tag","embeddable":true,"href":"https:\/\/fxex4.com\/shop\/wp-json\/wp\/v2\/product_tag?post=6162"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}