2.0 KiB
2.0 KiB
Technical Analysis Fundamentals
Technical analysis is the study of historical price and volume data to identify patterns and predict future market movements.
Key Concepts
Price Action
Raw price movement without indicators:
- Support and resistance levels
- Trend lines and channels
- Chart patterns (head and shoulders, double tops, etc.)
- Candlestick patterns
Trends
Markets move in trends:
- Uptrend: Higher highs and higher lows
- Downtrend: Lower highs and lower lows
- Sideways: Range-bound consolidation
- Trend strength measured by consistency
Volume
Trading volume confirms price movements:
- High volume confirms trends
- Low volume suggests weak moves
- Volume precedes price
- Divergences signal reversals
Common Indicators
Trend Indicators
- Moving Averages: SMA, EMA, WMA
- MACD: Trend and momentum
- ADX: Trend strength
- Parabolic SAR: Trend direction
Momentum Indicators
- RSI: Overbought/oversold conditions (0-100)
- Stochastic: Fast vs slow momentum
- CCI: Cyclical trends
- Williams %R: Momentum oscillator
Volatility Indicators
- Bollinger Bands: Price envelope around MA
- ATR: Average True Range for volatility
- Keltner Channels: ATR-based bands
- Donchian Channels: High/low breakouts
Volume Indicators
- OBV: On Balance Volume
- VWAP: Volume Weighted Average Price
- Volume Profile: Price levels by volume
- Chaikin Money Flow: Volume pressure
Timeframes
Different timeframes for different strategies:
- Scalping: 1m, 5m charts
- Day Trading: 5m, 15m, 1h charts
- Swing Trading: 4h, 1D charts
- Position Trading: 1D, 1W charts
Always analyze multiple timeframes for context.
Risk Management
Essential principles:
- Position Sizing: Risk 1-2% per trade
- Stop Losses: Define exit before entry
- Risk/Reward: Minimum 1:2 ratio
- Diversification: Multiple uncorrelated positions
Never trade without a plan and defined risk parameters.