1Technical Analysis Fundamentals
What is Technical Analysis?
Technical analysis is the study of historical price and volume data to predict future price movements. Unlike fundamental analysis, which focuses on company financials, technical analysis assumes that all information is already reflected in the price.
Core Principles
- • Market action discounts everything
- • Prices move in trends
- • History tends to repeat itself
- • Volume confirms price moves
What to Analyze
- • Price action and patterns
- • Volume and momentum
- • Support and resistance
- • Trend direction and strength
Key Benefits
- • Timing entry and exit points
- • Risk management through stops
- • Works on any timeframe
- • Applicable to all markets
2Chart Types & Timeframes
Understanding Chart Types
Candlestick Charts
Most popular chart type showing open, high, low, and close prices.
- • Green/white candles = bullish (close > open)
- • Red/black candles = bearish (close <open)
- • Wicks show intraday highs and lows
- • Body size indicates strength of move
Line Charts
Simple charts connecting closing prices over time.
- • Clean view of price trends
- • Less noise than candlesticks
- • Good for identifying major trends
- • Missing intraday price action
Bar Charts
Vertical bars showing OHLC data with horizontal ticks.
- • Vertical line = high to low range
- • Left tick = opening price
- • Right tick = closing price
- • Less visual than candlesticks
Volume Charts
Display trading volume alongside price action.
- • Confirms price movements
- • Higher volume = stronger signal
- • Breakouts need volume confirmation
- • Divergence can signal reversals
Timeframe Selection
Day trading, scalping, quick moves
Swing trading, position entries
Investment decisions, major trends
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3Support & Resistance
Understanding Key Levels
Support and resistance are the foundation of technical analysis. These levels represent areas where buying and selling pressure has historically caused price to reverse or pause.
Horizontal S&R
Clear price levels where stock repeatedly bounces
Trend Lines
Diagonal lines connecting swing highs or lows
Moving Average S&R
Key moving averages act as dynamic support/resistance
Round Numbers
Psychological levels like $50, $100, $200
Support Characteristics
- • Price floor where buying interest emerges
- • Multiple bounces increase strength
- • When broken, often becomes resistance
- • Volume should increase on bounces
- • Psychological levels often provide support
Resistance Characteristics
- • Price ceiling where selling pressure appears
- • Multiple rejections strengthen the level
- • When broken, often becomes support
- • Volume should increase on breakouts
- • Previous highs often act as resistance
4Trend Analysis
Identifying and Trading Trends
Uptrend Characteristics
Key Features:
- • Higher highs and higher lows
- • Rising moving averages
- • Volume increases on up moves
- • Support holds at previous highs
Trading Strategy:
- • Buy pullbacks to support
- • Trail stops below swing lows
- • Target previous resistance levels
- • Stay long until trend breaks
5Chart Patterns
Interactive Pattern Explorer
Head and Shoulders
Three peaks with middle peak highest
Bearish reversal after uptrend
Break below neckline
Height of head subtracted from neckline
6Technical Indicators
Essential Trading Indicators
Moving Averages
RSI (Relative Strength Index)
MACD
Bollinger Bands
Indicator Combination Tips
- • Use trend indicators with momentum oscillators
- • Combine multiple timeframe analysis
- • Look for confluence between indicators
- • Don't rely on single indicator signals
- • Volume should confirm price movements
- • Divergences often signal reversals
- • Adjust settings for different market conditions
- • Less is often more - avoid indicator overload
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7Putting It All Together: Trading Strategies
Complete Trading Approach
Trend Following Strategy
Strong trend + pullback to support/resistance
Bounce from key level with volume confirmation
Below support (bulls) or above resistance (bears)
Next resistance/support level or measured move
Breakout Strategy
Consolidation pattern near key level
Break of pattern with volume spike
Back inside the pattern
Pattern height added to breakout point
Reversal Strategy
Exhaustion at key level + reversal pattern
Confirmation candle after pattern completion
Beyond the reversal pattern high/low
Previous support/resistance level
Range Trading Strategy
Clear support and resistance levels
Bounce from range boundaries
Small distance beyond range boundary
Opposite side of the range
Risk Management Rules
Never risk more than 1-2% per trade
Always define exit before entering
Scale out at key resistance levels
Master Technical Analysis - Key Takeaways
Support and Resistance: These are the foundation of technical analysis. Master identifying these levels first.
Trend is Your Friend: Trading with the trend gives you the highest probability of success.
Volume Confirms Price: Strong moves should be accompanied by increased volume for validation.
Multiple Timeframes: Always check higher timeframes for context and overall trend direction.
Risk Management First: Protect your capital with proper position sizing and stop losses.
Pattern Recognition: Learn to identify key patterns, but always wait for confirmation.
Less is More: Don't overload your charts with indicators. Focus on price action first.
Practice Makes Perfect: Use paper trading to practice before risking real money.
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Risk Management
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Support & Resistance
Deep dive into identifying and trading key levels.
Technical Screener
Find stocks meeting your technical criteria automatically.
Chart Patterns
Complete reference guide to all major chart patterns.
Technical Analysis Checklist
Before Every Trade:
Pattern Recognition:
Common Technical Analysis Mistakes
Drawing Lines to Fit Your Bias
Forcing patterns where none exist leads to poor trading decisions
✓ Solution: Let the chart tell the story - be objective in pattern identification
Ignoring Higher Timeframes
Missing the bigger picture context leads to counter-trend trades
✓ Solution: Always check daily/weekly charts for overall trend direction
Over-relying on Indicators
Indicators lag price and can give false signals in choppy markets
✓ Solution: Focus on price action first, use indicators for confirmation only
Not Waiting for Confirmation
Jumping in too early results in false breakouts and failed patterns
✓ Solution: Wait for clear confirmation signals before entering trades
Poor Risk Management
Technical analysis is about probabilities - losses are part of the game
✓ Solution: Always use stop losses and never risk more than you can afford
Practice Recommendations
Start With These Steps:
- 1. Practice identifying support and resistance on historical charts
- 2. Learn to draw proper trend lines with at least 3 touches
- 3. Study major chart patterns on different timeframes
- 4. Paper trade your setups before using real money
- 5. Keep a trading journal to track your analysis
Recommended Practice Routine:
- • Spend 30 minutes daily reviewing charts
- • Focus on 3-5 stocks/assets consistently
- • Practice on different market conditions
- • Review both winning and losing setups
- • Join trading communities for feedback
- • Read price action books and resources
Technical Analysis Risk Disclaimer
Technical analysis is not a guarantee of future price movements and involves substantial risk. Past performance and historical patterns do not guarantee future results. Chart patterns and technical indicators can fail, and markets can behave irrationally for extended periods. Always use proper risk management, including stop losses and appropriate position sizing. Never risk more than you can afford to lose. The strategies and techniques discussed in this guide are for educational purposes only and should not be considered personalized investment advice. Consider your risk tolerance, experience level, and financial situation before implementing any trading strategy. Always consult with qualified financial professionals.