Technical Analysis

Master the art of reading price charts, identifying patterns, and using indicators to make data-driven trading decisions.

What is Technical Analysis?

The science of reading price movements

Technical analysis is the study of historical price movements to forecast future price direction. Unlike fundamental analysis, which examines economic factors, technical analysis focuses purely on price action, volume, and chart patterns. The core belief is that all relevant information is already reflected in the price.

Price Action

Everything you need to know is reflected in the price. Price movement tells the complete story of supply and demand.

History Repeats

Market patterns and price behaviors tend to repeat because human psychology remains consistent over time.

Trends Matter

Prices move in trends. Your job is to identify the trend and trade in its direction until it shows signs of reversal.

Chart Types & Timeframes

Choose the right chart and timeframe for your trading style

Line Charts

Connects closing prices with a continuous line. Best for identifying overall trends and long-term patterns.

Best for: Trend identification, beginners

Bar Charts

Shows Open, High, Low, Close (OHLC) as vertical bars. Provides more detail than line charts.

Best for: Daily analysis, swing trading

Candlestick Charts

Most popular chart type. Visual OHLC representation with filled/hollow bodies showing direction.

Best for: Pattern recognition, all traders

Choosing the Right Timeframe

M1-M5

Scalping

Very short-term, high frequency

M15-H1

Day Trading

Intraday positions, close by end of day

H4-D1

Swing Trading

Hold for days to weeks

W1-MN

Position Trading

Long-term, fundamental focus

Essential Technical Indicators

The tools every trader needs to master

Moving Averages (MA)

Trend

Smooth out price data to identify trend direction. SMA uses simple average, EMA gives more weight to recent prices.

Usage: Trend identification, dynamic support/resistance, crossover signals

Settings: Common: 20, 50, 100, 200 periods

RSI (Relative Strength Index)

Momentum

Measures speed and magnitude of price changes. Oscillates between 0-100.

Usage: Overbought (>70) / Oversold (<30) conditions, divergence signals

Settings: Default: 14 periods

MACD

Trend & Momentum

Shows relationship between two moving averages. Consists of MACD line, signal line, and histogram.

Usage: Trend direction, momentum strength, signal line crossovers

Settings: Default: 12, 26, 9 periods

Bollinger Bands

Volatility

Three bands based on standard deviation around a moving average. Bands widen/narrow with volatility.

Usage: Volatility assessment, mean reversion, breakout identification

Settings: 20 SMA, 2 standard deviations

Fibonacci Retracement

Support/Resistance

Horizontal lines indicating potential support/resistance based on Fibonacci ratios.

Usage: Finding pullback levels, setting targets, confluence zones

Settings: Key levels: 23.6%, 38.2%, 50%, 61.8%, 78.6%

Stochastic Oscillator

Momentum

Compares closing price to price range over a period. Shows momentum changes.

Usage: Overbought/oversold, divergence, %K/%D crossovers

Settings: Default: 14, 3, 3

Chart Patterns

Recognize patterns that predict price movements

Reversal Patterns

Head & Shoulders

Bearish reversal

Inverse H&S

Bullish reversal

Double Top

Bearish reversal

Double Bottom

Bullish reversal

Rising Wedge

Bearish reversal

Falling Wedge

Bullish reversal

Continuation Patterns

FlagsTrend continuation

PennantsTrend continuation

TrianglesBreakout direction

RectanglesRange breakout

Trading Strategies

Trend Following

Identify and trade in the direction of the established trend. Use moving averages and trendlines for confirmation.

✓ Pros

Higher win rate when done correctly

Larger profit potential

Clear entry/exit rules

✗ Cons

Miss trend reversals

Choppy market struggles

Requires patience

Range Trading

Buy at support and sell at resistance in sideways markets. Use oscillators to time entries.

✓ Pros

Clear support/resistance levels

Multiple opportunities

Good risk-reward

✗ Cons

Breakouts cause losses

Smaller moves

Needs discipline

Breakout Trading

Enter when price breaks through key levels with momentum. Volume confirmation is crucial.

✓ Pros

Catch start of big moves

Clear entry points

Momentum advantage

✗ Cons

False breakouts common

Requires quick reaction

Slippage risk

Scalping

Make many small trades for small profits. Requires fast execution and tight spreads.

✓ Pros

Many opportunities

Less overnight risk

Consistent small gains

✗ Cons

High stress

Costs add up

Requires screen time