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Could you suggest books that go deeper in the second type of technical analysis? Most of what I find online fits well in the first type you described.

The best resource I know is John Grady's "No BS Day Trading" book. It's part of his basic course at http://www.nobsdaytrading.com/courses/basic-course/

Reading that and applying it was a huge turning point for me in my trading.

Couldn't this strategy be easily automated, and therefore, probably has been competed away by now?

The more this strategy is automated, the more effective it becomes. This is a simple explanation for "trends", as people see liquidity consumption and enter on the side to further consume it - more people repeat the pattern. The net result is a "trend", which is a blunt way of saying "demand exceeded supply in <x> direction".

There is no sane way to automate this, since everyone's description of "enough" volume delta is different. Perhaps I open positions at a CD imbalance of 15%, bank of america waits on 19%, and chase at 25%. My actions at 15% further the delta, causing bank of america's 19% threshold to fire, which in turn increases the delta to 25% causing chase's threshold to fire. Until every day trader "gets on the same page" so to speak, this will not be automated. And...if they ever do get on the same page, then it only takes 1 person with decent equity to take the other automated strategies to the cleaners.

tldr; This will be automated away when greed no longer exists, i.e. never.

This is most adaptive algorithms work, though. As your scenario gets played out over and over, the high threshold people will notice the decline in profitability and look for ways of improving the algorithm. They'll look at the various parameters and notice that the lower the volume delta the higher the return, so the volume delta parameter will come down. As everyone's volume delta comes down, the strategy will work less and less until it roughly equals the discount rate.

Anything that can be completely automated will lead to an elimination of excess returns. Having a single parameter that differs between market participants is not enough to stabilize a long-term imbalance.

I appreciate the comment, but it just doesn't work out that way. In theory yes, what you are saying holds up. In practice(I'm running these 24/7 and generating my income solely from them) this has not happened yet, and is showing zero progress towards happening.

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