Wow.
Loads of bad information here and only a few good posts.
Let's clear up the misconceptions.
Banks and institutions DO use technical analysis, but not how most here think they do..
Banks and other large financial institutions are divided into two categories, the buy-side and sell-side. The buy-side consists of hedge funds, pension funds, mutual funds, etc. The sell-side is the market makers or banks. The two have very different goals. The buy-side is profit-motivated through speculation while the sell-side is not. The sell-side is motivated in making profits through spreads or commissions, and the more volume transacted the more they make. Some sell-side traders do make speculative trades, although they rarely do this. The reason they would do it is to increase bank profits, "increase shareholder value", and mostly for fatter bonuses although if you're not achieving budget targets job security becomes another issue altogether.
Technical analysis as we retailers use it is not as widely used by large buy-side institutions like it used to be. However, some funds do still use technical concepts. Was it not Paul Tudor Jones who said trade fundamentally, but enter technically? The reason many large buy-side firms aren't using TA anymore is that they instead opt for the more profitable algorithmic and quantitative analysis techniques. Ironically, many of these types of strategies study historical price behavior and statistical patterns just as technical analysis does. Technical analysis concepts are extremely important to these types of strategies, but to quote a sentence from the below link, "admitting use of TA in public is bad for business."
https://www.quora.com/What-do-hedge-funds-think-of-technical-analysis
Therefore, we can say a form of technical analysis is being used on the buy-side, however these modeling techniques are much different than what we retailers do and that's why it has its own name AKA quantitative analysis trading.
Keep in mind there are still some funds and large individual traders using technical analysis like we do, but fundamentals and global macro play a much bigger role in their strategies. More on this below.
Next, let's talk about the sell-side. Since the sell-side isn't really motivated by profits through speculation, they don't use TA to make speculative trades. But TA still plays a role in their decision making. You will see traders using pivot points, fibs, especially support/resistance, etc., but they use it as a tool to set limit orders. They need to provide liquidity at all times and they tend to cluster limit orders at key levels because price tends to turn from there. However, they can also see their customer flow and this provides a massive edge, not to mention all the analysts giving them detailed reports on the fundamentals. If you take away their order flow edge, most of these guys could not trade for shit. Trading on the sell-side is a whole different game vs. the buy-side. The sell-side is in the business to minimize risk (and profit from spreads/commissions) while the buy-side creates risk (in order to turn a profit).
For the large market participants, fundamentals and macroeconomics plays a much bigger role. These guys don't trade every day and only look for high probability opportunities on the macro landscape. They need to make every trade count and 10% a month is an awesome result for them. They may well use TA for entries/exits and scaling purposes. This group may exclude HFT and quantitative firms who can also be large and may be getting in and out of trades super fast. Their core strategies are derived from technical analysis concepts, but with heavy math and coding. It's like technical analysis on steroids.
For those who are interested in learning more about institutions, check out this awesome thread on FF about institutional trading from actual institutional traders. Although FX based, it may open your eyes to how the institutional space differs from the retail.
http://www.forexfactory.com/showthread.php?t=486128
