What is Technical Analysis?

According to Investopedia, technical analysis is a trading tool employed to evaluate securities and attempt to forecast their future movement by analyzing statistics gathered from trading activity, such as price movement and volume.

When most people think of technical analysis, they think of charts. All charts tell you is the price of a security over a certain time period, nothing else.

They do not predict the future. Learning to gain an advantage through charts is an art. There is no secret to using charts. It comes down to judgement and experience and those things take time.

I will go over the basics of reading a chart. This is how I do it, it is not the only way, but it is what works for me. TIP-keep things simple. Complexity breeds confusion and inaction.

Support and Resistance

The two most common words in the TA handbook. Some people refer to support and resistance as supply and demand levels. The theory is that once price reaches a predetermined level, it is likely to stop and reverse, by some amount. Of course, that is theory, it is never that easy.

Here are some examples: