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Technical Analysis

Reading charts to make gains.

Analyze price charts and patterns to time your trades.

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Introduction to Technical Analysis

Technical analysis uses past price and volume data to forecast future market moves. Unlike fundamental analys, which focuses on financials, it studies price charts and indicators to spot patterns and trends. 

The goal? Help traders time entry and exit points more effectively.

Technical analysis is based on the belief that historical price action can be used to forecast future price behavior.

Join Daniel as he explores how technical tools reveal market behavior in real time.

Daniel’s Initial Frustrations

Daniel, an enthusiastic investor, is frustrated by his poor timing in trades. 

He's become good at fundamental analysis, but he often enters trades too late, missing out on early gains. 

He also holds onto losing stocks too long, hoping they would eventually bounce back. 

Daniel realizes that strong fundamentals don’t always translate into well-timed trades. To sharpen his strategy, Daniel turns to technical analysis — a method that focuses on price trends and market signals to improve entry and exit decisions.

Understanding Price Charts

Price charts show how a stock’s price moves over time, the foundation of technical analysis. 

The main types include:

  • Line charts, which track closing prices
  • Bar charts, showing open, high, low, and close
  • Candlestick charts, similar to bar charts but use thicker colored bodies and thin wicks to show price movement

Each chart offers a unique lens into market behavior. Learning to read them helps traders spot trends, reversals, and entry points with greater confidence.

Candlestick Charts

Candlestick charts provide a visual representation of price movements using "candlesticks," each representing a specific time period. 

Each candlestick shows the open, high, low, and close prices. 

The body represents the area between the open and close prices, while wicks (or shadows) extend from the body to indicate the highest and lowest prices during a specific period. 

Typically, a green (or white) body indicates a price increase, while a red (or black) body shows a price decrease.

What Are Support and Resistance Levels?

Support and resistance are key concepts in technical analysis. 

  • Support is a price floor where a stock tends to stop falling and bounces back, as demand increases.
  • Resistance is a price ceiling where the stock price struggles to break through, as sellers take control.

Identifying these levels help traders plan their entry and exit points. 

Support and resistance levels act as psychological barriers where price trends are likely to reverse or temporarily pause.

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