Dave Aronson Evidence Based Technical Analysis Trading

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David Aronson, author of Evidence Based Technical Analysis ( John Wiley & Sons 2006) is
adjunct professor of finance at the Zicklin School of Business where he has taught a graduate
level course in technical analysis and data mining since 2002.
His interest in technical analysis dates back to the late 50s when as a teenager he began
studying the works of Edwards & Magee (Technical Analysis of Stock Trends) and the point &
figure charting method developed by Abraham Cohen of Chartcraft. While working as a broker
(account executive) for Merrill Lynch between 1973 and 1977, Aronson wrote several internal
technical analysis memos including one in December of 1973 to Robert Farrell, Merrills head
technician. It predicted the extent and duration of the 1974 decline and the timing of its reversal.
During this time Aronson was in regular communication with James Hurst, a pioneer in the
application of cycles to market data.
In 1977, Aronson left Merrill Lynch to begin an independant study of the nascent field of managed
futures strategies and in 1980 formed AdvoCom Corporation, an early adopter of modern
portfolio theory methods and computerized performance databases to the creation of multiadvisor futures portfolios and funds. A representative portfolio that began in 1984 has earned a
compounded annual return of 23.7%. In 1990 AdvoCom advised Tudor Investment Corporation
on their public multi-advisor fund.
In the late seventies, while conducting the research in computerized strategies for managed
futures Aronson realized the potential of applying of artificial intelligence to the discovery of
predictive patterns in financial market data. This practice, which is now gaining acceptance on
Wall Street, is referred to as data mining. In 1982 Aronson founded Raden Research Group, an
early adopter of data mining and non-linear predictive modeling to the development systematic
trading methods. Aronsons innovation was to apply data mining to the enhancement of
traditional computerized trading strategies. This approach was described for the first time in
Aronsons article, Pattern Recognition Signal Filters, Market Technicans Journal - Spring 1991.
Raden Research Group Inc. conducted predictive modeling and filter development research on
behalf of various trading firms including: Tudor Investment Corporation, Manufacturers Hanover
Bank, Transworld Oil, Quantlabs, and a number of large individual traders.

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