Technical Analysis

Introduction

Technical analysis is a method used to evaluate and forecast future price movements of financial assets, such as stocks, currencies, and commodities, based on historical price and volume data.

It involves studying charts, identifying patterns and trends, and using technical indicators, such as moving averages and oscillators, to analyze the asset's price and volume movements. Technical analysts believe that the market follows trends and that past patterns can predict future price movements.

They use technical analysis to make informed investment decisions and to time their trades. However, it is important to note that technical analysis is only one of many methods used in finance and should be used in conjunction with other analysis tools and strategies.

Trading Chart

A trading chart is a visual representation of the price movement of a financial asset, such as a stock, currency, or commodity, over a certain period of time. Trading charts are used by traders and investors to analyze price trends, identify patterns, and make informed trading decisions.

The most common types of trading charts are line charts, bar charts, and candlestick charts.

Line Chart

Line charts show the closing price of an asset over a period of time and are useful for showing long-term trends.

Bar Charts

Bar charts show the opening, high, low, and closing prices of an asset during a specific time period and are useful for identifying price movements and volatility.

Candlestick Charts

Candlestick charts are similar to bar charts but are more visually appealing, with colored bars representing the opening, high, low, and closing prices of an asset. Candlestick charts are also useful for identifying patterns and trends in price movements, such as bullish or bearish trends.

Heikin-Ashi Candlesticks

Heikin-Ashi candlesticks are a smoother variant of traditional candlesticks, removing noisy variations from the price thus being easier to analyze.

Note that heikin-ashi candles do not display true market prices values, you shouldn't backtest any strategy using heikin-ashi as the results would be unrealistic

TRENDS

Market trends refer to the general direction of price movements in financial markets over a certain period of time.

Market trends can be bullish (upward), bearish (downward), or sideways (lack of direction)

BULLISH TRENDS

Bullish trends occur when prices are rising, and there is a general sentiment of optimism among investors. This can be due to positive news, strong economic indicators, or favorable market conditions.

BEARISH TRENDS

Bearish trends occur when prices are falling, and there is a general sentiment of pessimism among investors. This can be due to negative news, weak economic indicators, or unfavorable market conditions.

SIDEWAYS TREND

Sideways trends occur when prices are moving within a narrow range, and there is no clear direction or trend in the market.

Market trends are important to traders and investors because they provide valuable information for making informed investment decisions. Trend analysis can help identify key support and resistance levels, trend lines, and technical indicators, which can be used to time trades, manage risk, and maximize profits. It is important to note that market trends can change quickly, and traders should always be vigilant and adapt to changing market conditions.

SUPPORT & RESISTANCE

Support and resistance are key concepts in technical analysis used to identify price levels where an asset is likely to experience a change in direction or a significant amount of buying or selling pressure.

SUPPORT

Support levels refer to the price levels at which buyers are expected to enter the market and prevent the price of an asset from falling further. When an asset's price approaches a support level, it is likely to experience buying pressure as traders and investors take advantage of the lower prices, causing the price to bounce off the support level and move higher. Support levels can be identified by looking for price levels where the asset has previously found support and bounced off in the past.

RESISTANCE

Resistance levels refer to the price levels at which sellers are expected to enter the market and prevent the price of an asset from rising further. When an asset's price approaches a resistance level, it is likely to experience selling pressure as traders and investors take advantage of the higher prices, causing the price to bounce off the resistance level and move lower. Resistance levels can be identified by looking for price levels where the asset has previously found resistance and failed to break through in the past.