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Technical Analysis 101 for newbies

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Learning thee technical analysis is very hard truth be told and it takes a lot of time and energy to learn and fully understand it. But when fully learned, you get to know the flows of the market and how to use it to your advantage and capitalize on the patterns necessary to achieve your success. First we have to know what Technical Analysis (TA) is and go through some basics

Technical Analysis (TA)

 It is said that human psychology is what moves the markets and I don’t really know how true and also some analysts also believe human emotions have an effect on the patterns and right analysis and the candlestick chart to use for predictions. For newbies, technical analysis has shown to be the most powerful trading tool but it’s also important to know that there are other factors to keep in mind and be aware of when developing or planning a trading strategy.

Candlesticks Chart

 ![image.png](https://images.ecency.com/DQmfX1veCphcFb4hSfHcX1urVEcCGsd4cmqD2Lrh8qYW7tN/image.png) [source](https://cdn.pixabay.com/photo/2016/12/31/03/08/chart-1942060_960_720.jpg)

In technical analysis, everything revolves around candlestick chart. You might want to know what is it, what it represent and what it’s used for. A candlestick chart shows a clear picture of the trading activities within a period. To be clear about the meaning; let’s say you have a chart set to 30 minutes, each candle will represent 30 minutes of trading activities. And there’s usually a green and red candle, green represents or means prices went up during that short period of time, while red candle means prices went down too.

There’s also what they call body and wick and not all candles have them. The part of the candle that is thicker is called the body, while the wicks are the thinner parts that always stick out from the body either from the top or bottom. Sometimes candles with almost no body appears and when it does it means that the trading that occur during that period took place at a very narrow price range which means that price didn’t really change much at that time.

*Some few important info on wicks are;

  1. Wicks on a candle represent either the highest or lowest prices during a trading period
  2. They are very useful when it comes to making one know when traders are either buying or sell

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Trading Volumes

** It’s also important to know that it’s only when you know trading volumes that you can start making predictions of price with candlesticks and knowing trading volumes is one of the essentials for better technical analysis. For every volume bar available at the bottom of a trading window, they show you the amount of an asset that has been traded during the time period you set. And if you are trading on a market that has a lot of volume which is kind of a general rule, low volume usually leads to price volatility, which is it can either spike up or go down.

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Patterns Involved

** Patterns is also important for traders, so when they draw lines on a candlestick charts, they are at the lookout for three (3) important things which are; is it at support, resistance or a recognizable price patterns

  1. Support is usually referred to the lower limits or downtrend where the asset or price is expected to go or rather could go.
  2. Resistance on the other hand is the upper limit where the price is expected to reach before bouncing back.
  3. To assess where the support and resistance prices would go, there are many ways to go about it but more often than not they reveal recognizable price patterns

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Indicators used in technical analysis (TA)

** In technical analysis trading, there are hundreds of different indicators used for trading and some common ones include; Moving Average Convergence divergence (MACD), Moving Averages, Relative Strength Index (RSI), and Bollinger Bands.

  1. For Moving Average Convergence divergence (MACD), it is used for measuring the volatility of prices and also to determine new trends in prices

  2. Moving Averages, they usually determine the price (if it will go up or down) of an asset within a period of time.

  3. Relative Strength Index (RSI) is the one to tell you if a crypto is usually over valued or under valued

  4. While the Bollinger Bands also more or less function like the MACD to measure the volatility of the market.

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