Is Technical Analysis for Stock Charts Broken?
Many traders are complaining that their favorite Technical Candlestick Patterns no longer work, or work some of the time but fail more often than not.
Technical Traders who have relied upon Technical Analysis patterns that were identified, named, and written about starting in the 1970’s are finding these once very consistent patterns are now questionable.
Is Technical Analysis broken as many traders claim? Can Technical Analysis still be used or should you just go back to guessing, or abandon stock trading for some other riskier trading instrument?
No, it is not broken and in fact it is stronger than ever. What is broken is the fact that Technical and Retail Trader training for Technical Analysis has not kept up with the changing Market Structure. The Retail Trader Market Participant Group includes those who have learned how to trade from home.
Why favorite technical chart patterns are no longer reliable is due to changes including new order types, new venues, giant Buy Side Institutions using Dark Pools in Alternative Trading Systems, High Frequency Trading Firms with millisecond trading capabilities, the Retail Broker Oligopoly, Professional Traders First of Day – End of Day orders, and many more.
These structural changes to how the professional side trades, have left most Retail Traders far behind in the dust with Technical Analysis training that is outdated and not keeping up with the patterns now common in stock charts.
It is not Technical Analysis that needs repair, nor should Retail Traders stop using it. Technical Analysis works, however the candlestick patterns have changed because of how Professional Trading has changed. Learning the new Relational Technical Analysis™ which incorporates more data into stock chart analysis is the answer. Relational Technical Analysis builds upon the foundation of training from Technical Analysis, and advances the trader’s skills to a professional level.
See the chart example below.
Martha Stokes CMT
TechniTrader technical analysis using a StockCharts chart, courtesy of StockCharts.com
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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