Technical analysis is the study of historical price and volume data to forecast future price movements. Unlike fundamental analysis, which focuses on a company's financial health, technical analysis assumes that all known information is already reflected in price. Traders use charts and indicators to identify patterns and trends.

Support and resistance are foundational concepts. Support is a price level where buying pressure is strong enough to prevent further decline, often acting as a floor. Resistance is where selling pressure halts an advance, acting as a ceiling. These levels can be identified by looking for multiple price touches. When a support level breaks, it often becomes resistance, and vice versa.

Moving averages smooth out price data to reveal trends. The simple moving average (SMA) calculates the average price over a specific period. Common periods are 20, 50, and 200 days. When a shorter-term moving average crosses above a longer-term one (golden cross), it signals bullish momentum. A cross below (death cross) signals bearishness. Moving averages also act as dynamic support and resistance.

The Relative Strength Index (RSI) measures the speed and change of price movements on a scale of 0 to 100. Traditionally, readings above 70 indicate overbought conditions (potential reversal down), while below 30 indicates oversold (potential reversal up). Divergence—when price makes a new high but RSI makes a lower high—can warn of weakening momentum.

Chart patterns like head and shoulders, double tops/bottoms, and triangles offer predictive value. For example, a head and shoulders top pattern typically signals a trend reversal from bullish to bearish. Volume confirmation is critical: patterns are more reliable when accompanied by increasing volume.

For day traders, 1-minute to 60-minute charts are used to spot intraday opportunities. Swing traders often use daily and weekly charts to capture multi-day moves. Regardless of timeframe, risk management is essential. Set stop-loss orders below support or above resistance to limit losses. Position sizing should be based on a percentage of account equity—never risk more than 1-2% per trade.

Technical analysis is not infallible. It works best in liquid markets with clear trends. Combining multiple indicators—for instance, waiting for a moving average crossover confirmed by high volume and an RSI above 50—increases probability. Backtesting strategies on historical data can help refine entry and exit rules. Ultimately, technical analysis is a skill that improves with practice and discipline.