Why Are Favorite Technical Chart Patterns No Longer Reliable?

Market Structure Has New Order Types & Venues

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.

See chart example below.

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.

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.

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Trade Wisely,

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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