Technical analysis (TA) is the study of price movement using charts, patterns, and indicators to predict future direction. It’s based on three core principles.
Core Principles
- Price discounts everything — All known info is in the price
- Prices move in trends — Trends persist until proven otherwise
- History repeats itself — Patterns recur due to human psychology
Tools of Technical Analysis
Chart Types
- Candlestick (most popular)
- Line chart
- Bar chart
Indicators
- Trend: Moving Averages, MACD
- Momentum: RSI, Stochastic
- Volatility: Bollinger Bands, ATR
- Volume: OBV, Volume Profile
Patterns
- Chart patterns (head & shoulders, triangles)
- Candlestick patterns (engulfing, pin bar)
- Support/Resistance levels
TA vs. Fundamental
| Technical | Fundamental | |
|---|---|---|
| Focus | Price & charts | Economic data |
| Timeframe | Short to medium | Long term |
| Data | Historical prices | GDP, rates, CPI |
| Entry timing | Excellent | Less precise |
Key Points
- Best used with risk management
- No indicator is 100% accurate
- Combine multiple tools for confirmation
- Practice reading charts on demo accounts