Technical Analysis 2.0: Mining Behavioral Psychology to Advance the Discipline

The origins of using past prices to forecast future ones in financial instruments can be traced as far back as Babylonian price records and Greek market sentiment assessments. But it was Charles Dow and his disciples that can be credited with adapting this ancient art form to modern day financial markets by adding scientific elements such as data gathering, hypothesis testing, and mathematical rigor. Over the last century, Dow’s original work has been expanded into the wide assortment of techniques, indicators, and methodologies in use today. If we consider this contemporary incarnation of TA as version 1.0, a case can be made for another significant transformation in Technical Analysis currently taking place (call it version 2.0), brought on by dramatic advances in data science, behavioral psychology, and artificial intelligence. This presentation will look in particular at the effect that behavior and psychology are having on Technical Analysis and what the implications are for market technicians.