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Technical analysis has much in common with the major principles at work in flow analysis. Both focus on behavioural patterns within financial markets. Both claim that market behaviour can indeed impact future prices. In addition, both reflect a belief that markets must move and traders must trade irrespective of whether or not there are changes in economic fundamentals. In this sense, if flow and technical analysis did not exist, they would have to be invented. Demand will eventually result in supply!
In these few posts, we take a look at the core ideas behind the fascinating and controversial field of technical analysis, its origins, how it works and its main analytical building blocks. For those looking to study this field in more depth, I provide useful references in the footnotes. Whereas flow analysis focuses on price trends that are created by order flow, technical analysis focuses on price patterns within those trends. Technical analysis remains a controversial subject for many people. Despite such controversy, its origins are rooted in mathematics and it has been around in one form or another for a very long time indeed.