What is Technical Analysis?

What is technical analysis?

Ever watched waves at the beach? They don’t crash randomly — there’s a rhythm to them. Some waves rise, some fall, and others just roll steadily. Markets move the same way.

Technical analysis is like watching the waves of the market — studying price movements to figure out where they might go next. Instead of getting caught up in company news or earnings reports, traders focus on charts, patterns, and indicators to ride the market’s waves instead of getting wiped out by them.

Just like an experienced surfer knows when to catch a wave or sit back and wait, technical traders look for patterns in price movements to time their trades.

The idea? History tends to repeat itself. If a price has moved a certain way before, there’s a good chance it might do something similar again. Just like ocean waves follow a natural cycle, so do markets.

The core idea of technical analysis

Price moves in trends

Market prices don’t move randomly; they tend to follow a direction — either up, down, or sideways. Traders try to find the trend and trade along with it instead of against it.

History repeats itself

If a certain price level has been important in the past, traders expect it to be important again. For example, if a stock has struggled to break above a certain price, it might struggle again if it reaches that level in the future.

Price reflects everything

Technical traders believe that everything that can affect a market — news, economic events, company earnings — is already included in the price. This means that instead of reacting to the news, traders just react to the charts.

Technical traders use price action or indicators — or a mix of both.

Price Action relies on reading raw price movements, focusing on trends, support and resistance, and candlestick patterns.

Indicators use mathematical calculations like moving averages, RSI, or MACD to confirm trends and momentum.

Some traders prefer the simplicity of price action, while others use indicators for extra confirmation. The goal is to identify high-probability trading opportunities based on historical price behavior.

Want to dive deeper into technical trading?

Check out:

• ‍Price Action Trading – Learn how traders use raw price movements to spot setups without indicators.
• Technical Indicators – Discover how tools like RSI, MACD, and VWAP help confirm trends and momentum.