Technical analysis: where to start

In short

What it is

Technical analysis starts from a simple idea: everything market participants know is already reflected in the price. Fear, greed, expectations about the news — all of it leaves traces on the chart as levels, patterns and impulses. A trader's job is to learn to read those traces.

Technical analysis doesn't tell you what comes next. It shows places where one side has the edge and the point at which your idea turns out wrong. That's enough to make money over a series of trades, as long as you control risk.

The four pillars

• Levels. Horizontal support and resistance, trendlines, channels, supply and demand zones. The foundation: this is where decisions are made.
• Chart patterns. Recurring shapes of movement: triangles, flags, wedges, head and shoulders. They help find entries and targets.
• Candlestick patterns. Pin bars, engulfing candles, harami. They show how price reacts at a level and act as an entry trigger.
• Indicators. Moving averages, RSI, MACD and more. They add context and confirmation but don't replace price.

Different approaches

On the same chart you can find several entries, and they'll all be different. One trader trades only levels, another only patterns, a third trendline breaks, a fourth bounces off moving averages.

There's no single right way to trade. There's your trading system: a set of rules for entering, placing the stop and exiting. The key is not to grab every method at once but to let trades come to you according to your system's rules.

The most common beginner mistake is using every tool at the same time. Twenty lines and five indicators don't give confidence, they paralyse: any idea will meet a contradicting signal.

Where to start

Common mistakes