I have finished rereading David Aronson’s book Evidence- Based Technical Analysis, Applying the Scientific Method and Statistical Inference to Trading Signals, a book I bought back in November 2007. This is no easy read and a bit technical, but worthwhile its price tag. The book is very good for those who have no background in statistics. It’s a great book to get to know statistics without having to learn the mathematics behind the theory. O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers. The book covers the essential fundamentals of trading, including the psychology of trading, its rules and money management.
Dive in for free with a 10-day trial of the O’Reilly learning platform—then explore all the other resources our members count on to build skills and solve problems every day. This is a classic work on technical analysis, written using easy-to-understand language. It was first published in 1988 in the pre-Internet era, so it’s partially outdated.
This makes it possible to simulate the method on historical data and determine its precise level of performance. The back testing of an objective method is, therefore, a repeatable experiment which allows claims of profitability … This chapter introduces the notion of objective binary signaling rules and a methodology for their rigorous evaluation.
Technical Analysis of the Financial Markets by John J. Murphy
We can’t recommend it as the first book on technical analysis, but it can be very helpful for a beginner in conjunction with the other books mentioned here. This book is devoted to trading using divergences (disagreements between indicators and prices), which the author considers the most reliable signal of a trend reversal. The book is short, written in easy-to-understand language and contains many examples. As an approach to research, technical analysis has suffered because it is a “discipline” practiced without discipline. In order for technical analysis to deliver useful knowledge that can be applied to trading, it must evolve into a rigorous observational science. It also discusses techniques such as the Bootstrap and Monte Carlo simulation for assessing the degree of randomness in back-tested results.
Much of popular or traditional TA stands where medicine stood before it evolved from a faith-based folk art into a practice based on science. Its claims are supported by colorful narratives and carefully chosen (cherry picked) anecdotes rather than objective statistical evidence. Cryptocurrencies and derivative instruments based on cryptocurrencies are complex instruments and come with a high risk of losing money rapidly due to leverage and extreme asset volatility.
- The book describes the basics of the Volume Spread Analysis (VSA) system, a method for analysing trading volume in combination with the size and shape of a candlestick.
- The book considers the market not in terms of patterns and algorithms but as an interaction and confrontation between buyers and sellers.
- When an objective analysis method is applied to market data, its signals or predictions are unambiguous.
- It was first published in 1988 in the pre-Internet era, so it’s partially outdated.
- DAVID ARONSON is an adjunct professor at Baruch College, where he teaches a graduate- level course in technical analysis.
This book’s central contention is that TA must evolve into a rigorous observational science if it is to deliver on its claims and remain relevant. The scientific method is the only rational way to extract useful knowledge from market data and the only rational approach for determining which TA methods have predictive power. Grounded in objective observation and statistical inference (i.e., the scientific method), EBTA charts a course between the magical thinking and gullibility of a true believer and the relentless doubt of a random walker. Evidence-Based Technical Analysis examines how you can apply the scientific method, and recently developed statistical tests, to determine the true effectiveness of technical trading signals.
About the author
Throughout the book, expert David Aronson provides you with comprehensive coverage of this new methodology, which is specifically designed for evaluating the performance of rules/signals that are discovered by data mining. Experimental results presented in the book will show you that data mininga process in which many rules are back-tested and the best performing rules are selectedis an effective procedure for discovering useful rules/signals. However, since the historical performance of the rules/signals discovered by data mining are upwardly biased, new statistical tests are required to make reasonable inferences about future profitability. Two such tests, one of which has never been discussed anywhere heretofore, are described and illustrated. This book is considered by many to be a good first read for anyone looking to learn technical analysis.
This book is suitable for beginners who already know the basics of technical analysis. The book describes the basics of the Volume Spread Analysis (VSA) system, a method for analysing trading volume in combination with the size and shape of a candlestick. evidence based technical analysis Nevertheless, it offers useful advice for any trader, regardless of whether they use this system or not. The book considers the market not in terms of patterns and algorithms but as an interaction and confrontation between buyers and sellers.
Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals
DAVID ARONSON is an adjunct professor at Baruch College, where he teaches a graduate- level course in technical analysis. He is also a Chartered Market Technician and has published articles on technical analysis. Previously, Aronson was a proprietary trader and technical analyst for Spear Leeds & Kellogg. He founded Raden Research Group, a firm that was an early adopter of data mining within financial markets. Prior to that, Aronson founded AdvoCom, a firm that specialized in the evaluation of commodity money managers and hedge funds, their performance, and trading methods.
It defines an evaluation benchmark based on the profitability of a noninformative signal. It also establishes the need to detrend market data so that the performances of rules with different long/short position biases can be compared. The book details candlestick patterns themselves and how to use them with trend lines and indicators such as Moving Averages, RSI and MACD for chart analysis. Since candlestick charts are the most common type of charts in modern technical analysis, this book is recommended for all traders, both novice and experienced, regardless of what asset class they trade.
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I also read this book and I only regret that my english is not so good to understand all contents.
Take O’Reilly with you and learn anywhere, anytime on your phone and tablet. David Aronson got interested in technical analysis as early as the 1950s. He later went on to write technical memos for Merrill Lynch and later advised Tudor Investment Corporation in 1990. Approaching TA, or any discipline for that matter, in a scientific manner is not easy. Scientific conclusions frequently conflict with what seems intuitively obvious.
The Ichimoku Cloud is an indicator that is not widely used among Western traders. It’s not easy to master, but it can be a very helpful tool for those who have been able to master it. This book is considered one of the best and most understandable tutorials on this indicator. Despite the fact that the author positions his book as a guide for beginners, it’s still best to start reading it if you’re already familiar with technical analysis. This is an extensive and well-organised reference book of chart patterns. This 1000-page work contains a detailed description of 63 chart patterns.
Managing Expected Returns and Downside Risk with Information from Technical Analysis
Written by a recognised expert in trading and technical analysis, Getting Start in Technical Analysis is full of examples, and its simple explanations make it easy to understand. Since the book is meant for novice traders, it will only teach the basics of technical analysis, but these basics will serve as a solid footing for further study of the subject. The disadvantage of the book is the use of bar charts by the author, which are sometimes difficult to read clearly. The book is widely considered to be one of the best books on technical analysis.
Japanese Candlestick Charting Techniques, Second Edition by Steve Nison
Despite the fact that the text is not always easy for a beginner to understand, the book is nevertheless designed for beginner and intermediate readers. It’s over 500 pages long and covers in detail a variety of topics, from the philosophy of technical analysis and Dow theory to trading tactics and the rules of building a trading system. Although the book is devoted to the technical analysis of traditional financial instruments such as stocks and futures, crypto traders will also find a lot of useful information in it. “Evidence-Based Technical Analysis” is a book that focuses on applying the scientific method and statistical inference to trading signals. When an objective analysis method is applied to market data, its signals or predictions are unambiguous.