Technical Trading with Imperfect Competition


ShanghaiTech SEM Working Paper No. 2018-001

Ming Guo

ShanghaiTech University - School of Entrepreneurship and Management


Technical analysis (TA) is modeled as a method to infer 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. Price change is positively related to both order flow and accumulated order flow in the presence of technical traders...

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Keywords: Technical analysis; risk-averse market makers; imperfect competition; illiquidity; efficiency

JEL Classification: D4, D82, D84, G11, G12, G14

Date Written: March 30, 2018

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