Curriculum·S203 Chart Literacy and Evidence·about 31 min
Market structure
By the end of this lesson you can
- →Define structure in terms that can be applied identically by two people to the same chart
- →Mark swing points using a stated rule rather than by eye, and defend the rule
- →State what a structure break does and does not establish
- →Report the evidence on trend-following rules accurately, including the caveats attached to the positive results
Sophomore · enrolled learners
This lesson opens with The literature on technical trading rules, surveyed.
- What happened
- Park and Irwin's 2007 survey in the Journal of Economic Surveys examined 95 modern studies of technical trading profitability. Fifty-six reported positive results, 20 reported negative results, and 19 were mixed. The authors then stated the qualification that governs how the positive count should be read: most of the empirical studies are subject to problems in their testing procedures, specifically data snooping, ex post selection of trading rules or search technologies, and difficulties in estimating risk and transaction costs. The positive results and the methodological problems are properties of the same body of work.
- The decision point
- Fifty-six out of 95 is the number that circulates, and it is not evidence that trend rules work, because a survey of studies is not a test of rules. Studies reporting failures are less likely to be written and less likely to be published, and rules are typically selected after inspecting the data they are then tested on. The finding to carry is not that structure-based methods fail; it is that the published evidence cannot distinguish between methods that work and methods that were chosen because they had already worked.
What you will be able to answer
- →What makes a structure definition usable?
- →What does a structure break establish?
- →What did the survey of 95 studies find?
- →Why is a survey of studies not a test of rules?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-6419.2007.00519.x
- https://papers.ssrn.com/sol3/papers.cfm?abstract_id=603481
- https://onlinelibrary.wiley.com/doi/abs/10.1111/0022-1082.00163
- https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr42.pdf
Confidence medium·Volatility low·Reviewed 2026-08-05·Owner unassigned
Contested
The profitability of technical analysis is genuinely unresolved and this lesson must not resolve it in either direction. Park and Irwin's own conclusion is that the evidence is positive on its face and compromised in its methods. A revision that reads this lesson as either an endorsement or a debunking has misread it.
Almost all of this literature is from equity, futures and foreign exchange markets over periods ending before crypto existed. Whether findings transfer to a 24/7 market with different participants and much shorter history is unknown, and the honest position is that the evidence base for crypto specifically is thin.