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Technical analysis

Learn technical analysis, an essential tool for traders who want to maximize the use of price and volume data to make market decisions

Basic principles of technical analysis

The price takes everything

Technical analysis proceeds from the fact that the price of an asset already includes all available information - news, economic data and other factors. All a trader needs to analyze is the price and trading volume

Prices are moving in trends

Prices in markets rarely change randomly. As a rule, they move in a certain direction - up, down or in a sideways trend. The trader's job is to identify the current trend and follow it until it changes

History is repeated

One of the key principles of technical analysis is that the behavior of market participants repeats itself. Certain patterns and patterns on the charts, such as head and shoulders or double bottoms, occur over and over again, providing an opportunity to predict future movements

Charts

Help to analyze past price movements and predict future ones.

  • Line chart - shows price dynamics in the form of a line.
  • Japanese candlestick chart - provides information about the opening price, closing price, highs and lows for a specific period.
  • Bar chart is an analog of Japanese candlesticks, but with a different visual representation.

Indicators

Indicators help traders identify trends, oscillations and overbought/oversold markets.

  • Moving Averages — smooth out price fluctuations to reveal general trends.
  • RSI (Relative Strength Index) — shows the strength or weakness of the trend and possible reversals.
  • MACD (Moving Average Convergence Divergence) — helps to determine the moments of entering and exiting a deal based on the crossover of moving averages.

Trend lines

Trend lines are used to identify market directions. A trend line is drawn at two or more points on the chart and helps to identify the current trend: upward, downward or sideways.

Technical analysis patterns

Patterns on the charts indicate possible trend reversals or continuation.

  • Head and shoulders - indicates a trend reversal.
  • Triangles - can show a trend continuation or change depending on their shape.
  • Flag and pennant - indicates the continuation of the trend after the correction.

Benefits of technical analysis

Easy to use

The charts and indicators are easy to understand, making technical analysis accessible to traders with any level of experience

Applicability to any market

Technical analysis can be used to analyze stocks, currencies, commodities and cryptocurrencies

Precise entry and exit points

Indicators and levels help traders pinpoint the exact moments to open or close trades

How to use technical analysis in trading

Define trend
Start by defining the current trend - whether it is up, down or sideways. This will allow you to follow the market movement rather than trading against it.
Use indicators and levels
For a more accurate entry into a trade, use indicators and support/resistance levels. This will allow you to avoid rushing and reduce risk.
Set stop-losses
To protect your money, always use stop-loss orders. They will help limit your losses in case of a sharp trend reversal.
Combine it with fundamental analysis
While technical analysis is useful for short-term forecasts, it is also important to consider fundamentals to understand more global trends.

Benefits of technical analysis

Easy to use

The charts and indicators are easy to understand, making technical analysis accessible to traders with any level of experience

Applicability to any market

Technical analysis can be used to analyze stocks, currencies, commodities and cryptocurrencies

Precise entry and exit points

Indicators and levels help traders pinpoint the exact moments to open or close trades