Technical Analysis
Technical analysis comprises the methods for reading and interpreting markets based on price and volume action. It ranges from the founding principles of chart analysis — identifying trends and key levels — to more specialised tools such as patterns, indicators and interpretive systems, without overlooking the risk-management discipline that underpins any practical application. The sheets in this discipline present its methods methodically, from founding principle to the concrete analysis of a chart, from introductory to advanced level.
The 12 sheets in this discipline
- 1Dow TheoryDow Theory, developed by Charles Dow in the late 19th century, is the foundational framework of technical analysis. It establishes core principles about market trends, phases, and confirmation signals that remain the basis of modern charting.
- 2Trends, Support and ResistanceTrends, support, and resistance are the most fundamental concepts in technical analysis. A trend defines the dominant direction of price movement, while support and resistance levels identify where buying and selling pressure concentrates.
- 3Chart PatternsChart patterns are recurring geometric formations on price charts that technical analysts use to forecast future price direction. They are classified as continuation patterns (signaling the trend will resume) and reversal patterns (signaling the trend will change).
- 4Japanese CandlesticksJapanese candlestick charting, developed by Japanese rice traders in the 18th century and introduced to the West by Steve Nison in 1991, is the most widely used method of visualizing price action. Each candlestick shows the open, high, low, and close for a given period.
- 5Moving AveragesMoving averages smooth price data to identify the underlying trend direction. They are the most widely used technical indicators, serving as dynamic support/resistance levels and generating trend-following signals through crossover systems.
- 6Fibonacci Retracements and ExtensionsFibonacci tools use mathematical ratios derived from the Fibonacci sequence to identify potential support/resistance levels and price targets. The key ratios -- 23.6%, 38.2%, 50%, 61.8%, and 161.8% -- are among the most widely used technical levels in financial markets.
- 7Oscillators and Technical IndicatorsOscillators and technical indicators are mathematical tools that transform raw price and volume data into actionable signals. They complement trend analysis by measuring momentum, overbought/oversold conditions, and trend strength.
- 8Volume and Open InterestVolume is the total number of shares or contracts traded during a given period. Open interest is the total number of outstanding derivative contracts. Together, they provide crucial confirmation of price movements and insights into market conviction.
- 9Intermarket AnalysisIntermarket analysis studies the relationships between four major asset classes -- stocks, bonds, commodities, and currencies -- to identify leading indicators and confirm trends. Developed primarily by John Murphy, it bridges the gap between technical analysis and macroeconomics.
- 10Risk Management and Money ManagementRisk management and money management are the discipline of controlling position sizes, setting stop-losses, and managing the risk/reward ratio of each trade. They are widely considered more important than entry signals for long-term trading success.
- 11Ichimoku Kinko HyoIchimoku Kinko Hyo ('equilibrium chart at a glance') is a comprehensive Japanese technical indicator developed by Goichi Hosoda in the 1960s. It provides a complete trading system in a single chart, showing trend direction, momentum, support/resistance, and trade signals simultaneously.
- 12Elliott Wave TheoryElliott Wave Theory, developed by Ralph Nelson Elliott in the 1930s, proposes that market prices move in recognizable fractal wave patterns reflecting the collective psychology of market participants. The basic pattern consists of five waves in the trend direction followed by three corrective waves.