Technical Analysis Basics

Every chart is a record of transactions: agreements between buyers and sellers at specific prices and times. Technical analysis is the practice of summarising that record so a trader can act consistently. Used well, it is a framework for organising uncertainty. Used badly, it is pattern-matching in noise.

Reading a candlestick

Each candle encodes four values: open, high, low and close. The body shows the distance between open and close; the wicks show rejected extremes. A long upper wick means buyers pushed price higher and could not hold it. A narrow body after a strong run suggests indecision. Individual candles mean little; sequences in context mean more.

Trend structure

The simplest structural definition remains the most useful: an uptrend makes higher highs and higher lows, a downtrend makes lower highs and lower lows, and anything else is a range. Defining trend structurally rather than visually removes a surprising amount of wishful thinking from analysis.

• Identify structure on a higher timeframe before trading a lower one.
• Mark the swing point that would invalidate your read.
• Accept that ranges are the default state of most markets.

Support, resistance and why levels break

Support and resistance are zones where previous transactions clustered, not precise lines. They matter because participants remember them: traders place orders near prior extremes, which concentrates liquidity there. Levels break when the resting orders are consumed — which is why the reaction after a break is more informative than the break itself.

A level is not a wall. It is a place where enough people previously changed their minds to leave a footprint.

Indicators: derivatives of price

Moving averages smooth price to reveal direction. Oscillators such as RSI compare recent gains and losses to describe momentum. Volatility bands describe how far price has stretched from its mean. None of them contain information that is not already in the price series — they reformat it. Stacking six indicators that measure the same thing produces confidence, not accuracy.

Timeframe alignment

A five-minute chart inside a weekly downtrend is a different proposition from the same pattern inside a weekly uptrend. Most avoidable analytical errors come from examining a single timeframe in isolation. Establish context first, then find the entry.

Educational disclaimer: this primer is general market education, not financial, investment or trading advice.