This paper examines the usefulness of technical analysis (TA) from the perspective of detecting market liquidity demand. An informed trader and a number of uninformed technical traders employ TA and trade strategically with liquidity traders and risk-averse market makers in a dynamic equilibrium...

Technical analysis (TA) is modeled as a method to infer market liquidity demand. Risk-averse market makers supply immediacy to an informed trader and uninformed technical traders, who conduct TA and trade strategically, and to liquidity traders, who trade randomly. Price change is positively...