What is Technical Analysis?

Technical analysis (TA) is a trading methodology that evaluates investments by analyzing statistical trends from trading activity. Unlike fundamental analysis that looks at financial statements, TA focuses purely on price action and volume.

📊 Technical Analysis

  • Studies price charts and patterns
  • Uses indicators (RSI, MACD, etc.)
  • Focuses on timing and trends
  • Works on any timeframe
  • "What is the market doing?"

📑 Fundamental Analysis

  • Studies financials and metrics
  • Evaluates intrinsic value
  • Focuses on long-term value
  • Better for investing
  • "Is this asset undervalued?"

Core Assumptions of TA

1
Market Discounts Everything

Price reflects all known information including fundamentals, emotions, and news.

2
Prices Move in Trends

Once established, trends tend to continue until a clear reversal signal appears.

3
History Repeats Itself

Human psychology doesn't change, so price patterns tend to recur over time.

The Three Pillars of Technical Analysis

1

Trend Analysis

"The trend is your friend"

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Uptrend

Higher highs & higher lows

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Downtrend

Lower highs & lower lows

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Sideways

Range-bound movement

2

Support & Resistance

Price levels where buyers/sellers concentrate

Support

Floor where buyers step in. Price bounces up from support.

Action: Look for long entries near support
Resistance

Ceiling where sellers step in. Price falls from resistance.

Action: Look for short entries near resistance
3

Volume Analysis

Volume confirms price movements

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Price Up + Volume Up = Bullish

Strong buying pressure confirms the uptrend

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Price Down + Volume Up = Bearish

Strong selling pressure confirms the downtrend

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Price Up + Volume Down = Weak

Rally lacks conviction, potential reversal ahead

Essential Technical Indicators

Indicators are mathematical calculations based on price and volume. They help identify trends, momentum, and potential reversal points.

📈

RSI (Relative Strength Index)

Momentum oscillator measuring overbought/oversold conditions.

> 70 = Overbought< 30 = Oversold
Learn RSI →
📊

MACD

Trend-following momentum indicator showing relationship between two EMAs.

Signal cross up = BullishSignal cross down = Bearish
Learn MACD →
〰️

Moving Averages (MA)

Smooths price data to identify trend direction and dynamic support/resistance.

Price above MA = BullishPrice below MA = Bearish
Types: SMA, EMA, WMA
📉

Bollinger Bands

Volatility bands placed above and below a moving average.

Touch upper band = OverboughtTouch lower band = Oversold
Used for: Volatility, Mean reversion

Leading vs Lagging Indicators

Leading Indicators

Predict future movements

  • RSI
  • Stochastic
  • Williams %R
⚠️ More false signals
Lagging Indicators

Confirm past movements

  • Moving Averages
  • MACD
  • Bollinger Bands
✓ More reliable, but delayed

Building Your Trading System

Successful traders combine multiple tools into a systematic approach. Here's a framework to build your own system.

1

Identify the Trend

Use higher timeframe (4H/Daily) to determine overall trend direction.

Tools: Moving Averages, Trendlines, Price Structure
2

Find Key Levels

Mark horizontal support/resistance and dynamic levels.

Tools: Horizontal S/R, Fibonacci, Moving Averages
3

Wait for Confirmation

Use indicators and patterns to time your entry.

Tools: RSI Divergence, Candlestick Patterns, MACD Cross
4

Manage Risk

Always define stop loss and take profit before entering.

Rules: 1-2% risk per trade, 1:2+ reward/risk ratio

💡 Pro Tips

Multi-timeframe Analysis

Higher timeframe for direction, lower for entry

Don't Overcomplicate

2-3 indicators max. Too many = analysis paralysis

Backtest Everything

Test your system on historical data before risking real money

Journal Your Trades

Track every trade to identify patterns in your performance

Apply What You've Learned

Use our technical analysis tools to practice these concepts on live markets.

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Frequently Asked Questions

Is technical analysis reliable for crypto?

Technical analysis works well in crypto because crypto markets are heavily influenced by retail trader psychology, which creates recognizable patterns. However, crypto is more volatile than traditional markets, so always use wider stop losses and manage risk carefully.

What timeframe is best for technical analysis?

The daily chart is the most reliable for beginners. Higher timeframes (weekly, monthly) provide stronger signals but fewer opportunities. Lower timeframes (1h, 15m) offer more trades but more noise. Many traders use multiple timeframes — the daily for direction and the 4h or 1h for entries.

Can you combine fundamental and technical analysis?

Absolutely. Many professional traders use fundamentals to decide WHAT to trade (strong projects, upcoming catalysts) and technicals to decide WHEN to trade (entries, exits, stop losses). This combination often produces the best results.

How long does it take to learn technical analysis?

Basic concepts like support/resistance and trend lines can be learned in a few weeks. Becoming consistently profitable with TA typically takes 6-12 months of practice and screen time. Start with paper trading before risking real capital.

🧠

Test Your Knowledge

Answer these questions to earn XP and unlock achievements.

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Question 1

What is a core assumption of technical analysis?