Fooled by Technical Analysis: The perils of charting, backtesting and data-mining, is available on an annual subscription basis. This is an online book and if you subscribe you will not get a hard copy or a PDF. You can use your username and password to read the book online. (Free extensions of the subscription period will be provided upon request.)
First revision: September 20, 2017. A section on pitfalls of validation tests was added.
It was about time that someone spoke up about the perils of chart analysis, back-testing and data-mining clearly and honestly. In this book you will learn why naive chartists and quants have no chance of profiting from trading the markets and how expert chartists and quants attempt to maximize their winning odds. There are many examples that illustrate the points made in the book.
You will learn why:
- Classical chart patterns are unprofitable
- Chart analysis has no logical foundation
- Statistical hypothesis testing is not applicable in system development
- Naive quants are fooled by the expectation formula
- Out-of-sample validation tests should be avoided
- Walk forward optimization and Monte Carlo analysis are ineffective
- Frequent backtesting almost always leads to failure
You will also learn about:
- The limitations of backtesting and how to properly use it
- Data-mining and data snooping bias
- Processes that contribute to data-mining bias
- Popular myths about data-mining bias
- The pitfalls of strategy validation tests
- Effective trading system validation tests
- Determining capital requirements for system trading
- Practical ways to determine position size
- The current alternatives to technical analysis
- Cognitive biases that plague chart analysis
- The proper use of patterns and indicators by expert chartists
- The effects of trading friction and trading timeframes on profitability
and much more.
Bonus: A free subscription to the book 15 Lies About Trading And Investing.
Online book subscribers do not receive a hard copy, ebook or PDF. Instead they can use the username and password selected below to read the books online. Note: there are no refunds for cancellations. After subscribing you can download a receipt from your subscription details page.
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