Technical Analysis
Reading price and volume to identify trend, momentum, and key levels.
Reading price and volume to identify trend, momentum, and key levels.
Reading price and volume to identify trend, momentum, and the levels where buyers or sellers are likely to step in. Doesn't try to value a business; it reads what the market is doing right now.
Foundational concepts
Trend
The direction of price over a defined window. Three states: uptrend (higher highs + higher lows), downtrend (lower highs + lower lows), and sideways / range-bound. Most indicators are most useful inside a clear trend.
Support & resistance
Price levels where buyers or sellers have repeatedly turned the market. Support tends to act as a floor (demand returns), resistance as a ceiling (supply appears). Levels broken on volume often flip roles.
Volume
Number of shares traded in a period. Confirms the move: a breakout on rising volume is more credible than the same breakout on falling volume. Divergences between price and volume signal weakening conviction.
Timeframe
Same chart, different conclusions: an uptrend on the weekly might be a pullback on the daily. Most disciplined TA picks a primary timeframe to define the trend and a shorter one to time entries.
Indicator families
e.g. SMA, EMA, WMA, DEMA
e.g. RSI, Stochastic, MACD, CCI, Williams %R
e.g. Bollinger Bands, ATR, Keltner Channels
e.g. OBV, Volume MA, A/D Line, MFI
e.g. ADX/DMI, Aroon, Parabolic SAR
Pattern library
Recurring candle shapes that traders read as supply / demand shifts. Each pattern carries meaning only inside a specific prior trend. The same shape signals different things at the top vs the bottom of a move.
Doji
Open and close at essentially the same level: body is a thin horizontal line.
Bullish Engulfing
A small red candle followed by a large green candle whose body completely engulfs the prior session's body (open below the prior close, close above the prior open).
Bearish Engulfing
A small green candle followed by a large red candle whose body completely engulfs the prior session's body (open above the prior close, close below the prior open).
Hammer
Small body sitting near the top of the candle's range with a long lower wick at least twice the body's height.
Shooting Star
Small body near the bottom of the candle's range with a long upper wick at least twice the body's height.
Morning Star
Three candles: (1) a long red candle continuing the downtrend, (2) a small-bodied candle (any colour) that gaps below the prior close, (3) a long green candle that closes above the midpoint of the first candle's body.
Honest caveats
Indicators lag price by construction; they smooth what already happened. A signal firing means the move is already underway.
Patterns and indicators that work in trending markets fail in choppy ones, and vice versa. Trade size and stop placement decide outcomes more than the signal itself.
Backtested edges decay as more participants trade them. Treat historical hit rates as upper bounds, not promises.