Book Review: The New Science of Technical Analysis (Thomas DeMark)

It was quite difficult to approach writing a review after having read Tom DeMark's The New Science of Technical Analysis. After all, how does one judge a book written by a living person with an almost legendary status in the world of financial trading. Despite the fact that the book was written decades ago, it is still a generous source of the extremely useful insights on technical analysis. Tom tries to use a scientific approach in one of the most unscientific fields — financial trading, and does so rather successfully.

The book is quite long and it isn't very easy to read. It includes many chart examples from all sorts of markets. Below is the list of the theses voiced by DeMark in his work:

• Conventional market analysis methods are inaccurate and fail to show consistent returns.
• Strictly mathematical and emotionless approach is the cornerstone of the successful technical analysis.
• The uptrend is over "when the last buyer has bought" and the downtrend is over "when the last seller has sold".
• There are many ways to analyze charts — trendlines, patterns, indicators, etc. — they all work if used properly.
• Developing and testing your own analytical and trading tools is an important part of learning.

The New Science of Technical Analysis is a great book. It is an ultimate source of trading ideas and inspirational material. It is worth reading because of the following advantages:

• A strict mathematical approach to determining the chart points and signals.
• All areas of the technical analysis are covered.
• The book presents a lot of ideas for indicators, expert advisors, and fully developed trading strategies.
• It will inspire you to develop your own analytical rules and tools.

With all the pros, unfortunately, this book has its own cons too. Here is a subjective list of disadvantages that might prevent you from getting the usual pleasure of book reading:

• It is written in a very difficult language. It is almost impossible to read it without stops and returns.
• A lot of complex things are described poorly. For example, if not for the sample code provided in the book, it would be close to impossible to build the Range Expansion Index for MetaTrader using only DeMark's textual description.
• ™ symbols everywhere in the text! Don't you hate them?! :-).
• DeMark talks a lot about his research of the presented methods but he doesn't provide any statistical data to prove his research. This is a huge disadvantage for a book that talks about relying on scientific approach to trading.

Overall, it is still an awesome book to read, even if difficult at times. It will help you sticking to the accurate analytical methods and will give you enough of the basic information to create your own methods of technical analysis. And once you get used to them, you will be able to trade successfully. If you plan to trade only Forex, you can skip some chapters to save yourself from Tom's writing style.

If you have any questions, comments, or opinion regarding The New Science of Technical Analysis by Thomas R. DeMark, please feel free to join for a discussion on our Forex forum.

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