Day 23/365: Introduction to Technical Analysis

Welcome to Day 23 of our 365-day stock market learning journey.
So far, we studied company financials and ratios. But now comes the tool traders use to answer one powerful question:

“When should I buy and when should I sell?”

The answer is Technical Analysis.

Introduction to Technical Analysis

What Is Technical Analysis?

Technical analysis is the study of:

• Price movements
• Volume
• Market behavior

to predict future price direction.

It does NOT focus on company profits or balance sheets.
It focuses on how buyers and sellers behave in the market.

Why Prices Move

Stock prices move because of:

• Fear
• Greed
• News
• Demand & Supply

Technical analysis converts this emotional activity into patterns and signals.

Three Core Principles

1. Price Discounts Everything

All news, results, and events are already reflected in the price.

2. Prices Move in Trends

Markets do not move randomly.
They move in:

• Uptrends
• Downtrends
• Sideways trends

3. History Repeats Itself

Human psychology never changes, so price patterns repeat.

Types of Charts

1. Line Chart

Shows only closing prices.

2. Bar Chart

Shows open, high, low, close.

3. Candlestick Chart

Most popular.
It shows market psychology clearly.

Trend Analysis

Trend is the direction of price.

• Higher highs = Uptrend
• Lower lows = Downtrend
• Flat movement = Sideways market

Traders follow the trend to reduce risk.

Support & Resistance

• Support – where price stops falling
• Resistance – where price stops rising

These levels act like invisible walls.

Volume

Volume shows how many shares are traded.

High volume = strong move
Low volume = weak move

Price + Volume together confirm trends.

Technical Indicators

Some popular ones:

• RSI (Relative Strength Index)
• MACD
• Moving Averages
• Bollinger Bands

They help traders find:

• Entry points
• Exit points
• Trend strength

Who Uses Technical Analysis?

• Intraday traders
• Swing traders
• Options traders
• Crypto traders

Even long-term investors use it for better entry.

FAQs – Real Investor Situations

Q1. Can technical analysis work without fundamentals?

Yes, especially for short-term trading.

Q2. Is technical analysis risky?

Only if used without risk management.

Q3. Can beginners learn it?

Yes. Start with trends, support, and moving averages.

Q4. Does it work in Indian markets?

Yes. It works in NSE, BSE, Forex, and Crypto.

Q5. Is technical analysis accurate?

No method is 100% accurate, but it gives probability advantage.

Final Thought

Technical analysis is the language of the market.
Those who understand it don’t guess — they calculate their moves.