How to Read Technical Analysis Charts

What is Technical Analysis?

Technical analysis is the study of historical price action to forecast future price movements. It is based on the idea that price discounts everything.

Candlestick Patterns

Candlesticks show four key prices: Open, High, Low, and Close (OHLC).

Bullish Engulfing: A large green candle that completely engulfs the previous red candle. Strong buy signal.

Bearish Engulfing: A large red candle that engulfs the previous green candle. Strong sell signal.

Doji: Open and close are nearly equal. Signals indecision in the market.

Hammer: Small body with a long lower wick. Signals potential reversal from downtrend.

Support and Resistance Levels

Support is a price level where buyers repeatedly step in. Resistance is where sellers consistently push price back down. A broken support becomes new resistance.

Moving Averages

The 50 EMA and 200 EMA are the most widely watched indicators. When price is above the 200 EMA, the market is in a long-term uptrend.

Mastering technical analysis takes practice. Start with support/resistance and candlestick patterns, and gradually add indicators.