Technical analysis is a popular method used by traders to predict future price movements based on historical data. It involves studying charts, price patterns, and indicators to identify potential trading opportunities.
Charts are the foundation of technical analysis, with the most common being line, bar, and candlestick charts. Candlestick charts, in particular, offer valuable insights into market sentiment through formations like doji, engulfing patterns, and hammers.
Indicators help traders make informed decisions. Three widely used indicators are:
- Moving Averages (MA) – Smooth out price fluctuations to identify trends.
- Relative Strength Index (RSI) – Measures momentum and overbought/oversold conditions.
- Moving Average Convergence Divergence (MACD) – Identifies trend direction and reversals.
By combining charts, patterns, and indicators, traders can develop effective strategies to enhance their trading decisions. However, no method guarantees success, and risk management is essential to limit losses.