Technical analysis is a technique where you use indicators to predict the price of a stock. The beauty of technical analysis is the fact that it can be used on every timescale and on every stock. Before we introduce the tutorials, we will discuss how technical analysis works.
How does technical analysis work?
When they use these indicators for the first time, a lot of people think that technical analysis is some kind of math; this isn’t the case. Technical analysis is not an exact science and can only be used for timing your trades. You are always looking for a combination of certain factors.
The more indicators that are combined, the bigger the chances are that the price can be predicted at that point. With technical analysis you are always looking for the point where your chances of making a successful trade are the highest.
Tutorial 1: Reading candlesticks
A lot of beginning traders use flowing charts, but they shouldn’t. It’s better to use candlesticks because they reflect the market a lot better and contain a lot of information. Candlesticks show the price over a certain period of time including the low, high and the moment of opening and closing.
Tutorial 2: Recognizing a trend
With technical analysis the first step you take is usually recognizing a trend. There are three possibilities: the price will go up, the price will go down or, if there is no clear direction, there is consolidation.
Tutorial 3: Support & resistance, trend lines and horizontals
These are the first tools that you can use with technical analysis. Support and resistance are the levels that the price can’t seem to move past, at least temporarily. Horizontals and trend lines are very handy for discovering these levels and indicating them on your screen.
Tutorial 4: Moving averages as an indicator
With technical analysis the moving averages are the most useful instruments that you can use to support your trading decisions. The weighted averages aren’t just used for determining a trend, but can also be used perfectly for determining the strong support and resistance levels.
Tutorial 5: Fibonacci levels
The Fibonacci numbers are still a big scientific mystery, but it’s clear that they influence nearly everything in our lives. Fibonacci levels can be used to discover resistance or support levels that have a good chance of experiencing a bounce, helping you time your trades better.
Tutorial 7: RSI and MACD
The RSI and MACD can be used to confirm or debunk a trend. When there is divergence between these indicators and the price movement, it may indicate that there is a trend reversal coming up. Therefore you should check at least one of these indicators before you open a position.
Getting started with technical analysis
After reading these tutorials, you already know a lot about technical analysis. The number of technical indicators is almost unlimited and all these indicators can help you with your trading activities. Eventually it’s important that you select the indicators that you prefer to use. This will allow you to get better results.
Don’t forget that using just one technical indicator doesn’t really help. Always look for more indicators that support your prediction, so you can make a proper decision. Definitely use strong horizontal levels. Eventually the OHLC bar will be decisive; always look at the price action of the previous bar and see if this in harmony with the trade that you want to execute.