Price Discovers Everything

Technical analysis is the study of price patterns and market data to predict future price movements. Unlike fundamental analysis — which asks "what is this company worth?" — technical analysis asks "what is the market doing, and where is it likely to go next?"

The core belief of technical analysis is that all known information is already reflected in the price. News, earnings, analyst opinions — it's all priced in. What's left is the price action itself, which reveals the true battle between buyers and sellers.

Trends: The Foundation

A trend is the general direction of price movement. The single most important rule in technical analysis: "The trend is your friend." Fighting the prevailing trend is the fastest way to lose money.

Uptrend — Series of higher highs and higher lows. Buyers are in control.
Downtrend — Series of lower highs and lower lows. Sellers are in control.
Sideways/Range — Price oscillates between a defined support and resistance level. No clear direction.

Support and Resistance

Support is a price level where buying interest is strong enough to overcome selling pressure, preventing the price from falling further. Think of it as a floor. Resistance is the opposite — a ceiling where selling pressure overcomes buying.

These levels tend to hold because of trader psychology: people remember prices where they should have bought or sold, and they place orders at those same levels in the future. A level that gets tested multiple times and holds becomes even more significant.

When support breaks, it often becomes resistance (and vice versa) — a principle called polarity. The floor becomes the ceiling.

Basic Chart Patterns

Double Bottom — Price tests the same low twice and bounces both times. Bullish reversal pattern. It suggests sellers tried and failed to push prices lower — they've exhausted themselves.
Double Top — The bearish opposite. Price tests the same high twice and fails to break through. Bullish momentum is fading.
Head and Shoulders — A peak (head) flanked by two lower peaks (shoulders). The most reliable reversal pattern, signaling a shift from uptrend to downtrend.
Cup and Handle — A bullish continuation pattern. Price forms a rounded bottom (cup), followed by a small pullback (handle) before breaking to new highs.

Common Beginner Mistakes

Overcomplicating charts — 10 indicators on one chart creates confusion, not clarity. Start with price, volume, and one moving average. Add more only when you're consistently profitable with the basics.
Ignoring the bigger timeframe — A bullish pattern on a 5-minute chart means nothing if the daily chart is in a downtrend. Always check the higher timeframe first.
Analysis paralysis — Looking for perfect setups means you never trade. No pattern works 100% of the time. Technical analysis is about probabilities, not certainties.

Key Takeaways

Technical analysis studies price action to predict future moves. All known information is in the price.
Trends are the foundation. Fight them at your peril.
Focus on price, volume, support/resistance, and one moving average. Master the basics before adding complexity.