Introduction to Technical Analysis#
Technical Analysis (TA) is the study of past price and volume data to forecast future price movements.
Core Principles#
1. Price Discounts Everything#
All known information (fundamentals, news, sentiment) is already reflected in the price.
2. Prices Move in Trends#
Markets move in identifiable trends - up, down, or sideways. Trends persist until a reversal signal appears.
3. History Repeats Itself#
Human psychology doesn't change. Patterns that worked in the past tend to repeat.
Types of Charts#
Line Chart#
- Plots closing prices connected by a line
- Simplest view, good for identifying trends
Bar Chart (OHLC)#
- Shows Open, High, Low, Close for each period
- More detail than line chart
Candlestick Chart (Most Popular)#
- Visual representation of OHLC
- Body: Shows open-to-close range
- Wicks/Shadows: Show high-low range
- Color-coded: Green (bullish) / Red (bearish)
Timeframes#
| Timeframe | Used By | Purpose |
|---|---|---|
| 1m, 5m, 15m | Scalpers | Intraday micro-moves |
| 1h, 4h | Day/Swing traders | Short-term trends |
| Daily | Swing traders | Medium-term analysis |
| Weekly | Position traders | Major trend direction |
| Monthly | Investors | Long-term perspective |
Getting Started#
- Install TradingView (free charting tool)
- Start with daily candlestick charts
- Learn to spot support and resistance first
- Add one indicator at a time (don't overload)