Technical analysis is the study of what buyers and sellers have already done. It doesn't tell you what a business is worth; it tells you where the crowd has drawn lines in the sand and how strongly they're defending them.
What technical analysis is
All fundamentals eventually show up in price. Technical analysts flip that around and study price directly, arguing that patterns in charts often reflect information not yet widely known. Whether that's true in every case is debatable — but the tools are useful for timing and risk management.
Reading a chart
- Candlesticks show open, high, low, and close for a period. Colour indicates whether the close was above or below the open.
- Volume tells you conviction. A price move on high volume is more meaningful than the same move on light volume.
- Time frame matters: a pattern on a daily chart says something different from the same pattern on a 5-minute chart.
Trends and support/resistance
Trends are the single most useful concept. Uptrends make higher highs and higher lows; downtrends do the opposite. Support and resistance are price levels the crowd has repeatedly reacted to — round numbers, prior highs, and moving averages.
Common indicators
- Moving averages (50-day, 200-day) — smooth out noise and mark trend direction.
- Relative Strength Index (RSI) — a 0–100 momentum gauge; extremes hint at exhaustion.
- MACD — a moving-average crossover signal for shifts in momentum.
- Bollinger Bands — visualise volatility around a moving average.
Limits and honest caveats
Frequently asked questions
Does technical analysis actually work?
The evidence is mixed. Some patterns show statistical edge over short horizons, especially when combined with volume and volatility signals. Most active traders underperform passive investors, so treat it as one input, not a system.
Can I use technical analysis for long-term investing?
Yes — many long-term investors use simple trend and moving-average signals to time entries into positions they've chosen on fundamentals. It rarely helps to use it as the sole basis for owning a business.
What's the best indicator to start with?
A simple 200-day moving average tells you a lot with almost no complexity. Combined with volume and a basic support/resistance eye, it covers most of what beginners need.
Put this into practice
Open a real ticker, ask Auri your own questions, and track what you learn — all in one calm workspace.