Technical Analysis
Learn how to read charts, identify patterns, and use indicators to make informed trading decisions.
show_chart What is Technical Analysis?
Technical analysis is a trading discipline that evaluates investments and identifies trading opportunities by analysing statistical trends gathered from trading activity, such as price movement and volume. Unlike fundamental analysis, which attempts to evaluate a security's intrinsic value, technical analysis focuses on patterns of price movements, trading signals, and various other analytical charting tools.
Technical analysts believe that the collective actions of all participants in the market accurately reflect all relevant information, and therefore, prices represent a fair value which will continue to evolve in recognisable patterns.
The Three Core Principles
The Market Discounts Everything
All known information — economic data, news, company reports — is already reflected in the current price. Technicians only need to study the price itself.
Prices Move in Trends
Once a trend is established, prices are more likely to continue in that direction than to reverse. Identifying and trading with the trend is fundamental.
History Repeats Itself
Market psychology tends to be consistent over time. Chart patterns that have worked historically tend to continue working because they reflect human emotions.
Key Technical Analysis Tools
Candlestick Charts
Visual representation of price action showing open, high, low, and close. Patterns like doji, hammer, and engulfing candles reveal sentiment shifts.
Moving Averages
Smooth out price data to reveal trend direction. The 50 and 200-period MAs are widely watched. Crossovers generate buy/sell signals.
RSI
Momentum oscillator ranging from 0–100. Readings above 70 suggest overbought; below 30 suggest oversold. Used to identify potential reversals.
Support & Resistance
Key price levels where buying or selling pressure has historically been concentrated. Breakouts generate trading signals.
MACD
Shows the relationship between two EMAs. MACD crossovers and divergences with price are popular entry/exit signals.
Bollinger Bands
Volatility bands placed above and below a moving average. Price touching bands may indicate overbought or oversold conditions.
Volume Analysis
Volume confirms price movements. A breakout accompanied by high volume is more likely to be sustained.
Fibonacci Retracement
Uses key Fibonacci ratios (23.6%, 38.2%, 50%, 61.8%) to identify potential support and resistance levels.