Technical analysis is the art of deriving future movements from past price action. To many beginners it looks like reading tea leaves — but behind the patterns lies solid market psychology.

The Three Core Principles

1. The Market Discounts Everything

All available information — fundamentals, news, rumors, emotions — is already reflected in the current price. You do not need to know why the price is rising, only that it is rising.

2. Prices Move in Trends

An existing trend is more likely to continue than reverse. Uptrends consist of higher highs and higher lows, downtrends of lower highs and lower lows. Sideways phases are the calm between two trends.

3. History Repeats Itself

Human psychology does not change. Fear and greed drive markets today just as they did 100 years ago. That is why certain chart patterns repeat over and over.

The 5 Most Important Chart Types

Line chart: Only closing prices. Simple, clear, ideal for the big picture.
Candlestick chart: Open, High, Low, Close in one candle. The standard for technical analysis. Green candle = price rose, red candle = price fell.
Bar chart (OHLC): Similar to candlestick but as lines. Popular with American traders.
Heikin-Ashi: Smoothed candlesticks for clearer trend recognition. Less noise but delayed signals.
Point and Figure: Only significant price movements, ignores time. Ideal for support/resistance analysis.

Support and Resistance

The most important concepts in technical analysis:

Support: A price level where demand is strong enough to stop the price decline. Buyers step in because they perceive the price as attractive.

Resistance: A price level where supply is strong enough to stop the price advance. Sellers take profits or open short positions.

The rule of thumb: The more often a level is tested, the stronger it is. A breakthrough of a strong level is a significant signal.

Moving Averages

The simplest and most reliable indicator:

SMA 50 (50-day average): Short-term trend. Price above = bullish, below = bearish.
SMA 200 (200-day average): Long-term trend. The Golden Cross (SMA 50 crosses SMA 200 from below) is one of the strongest buy signals in technical analysis.
EMA (Exponential Average): Weights recent data more heavily. Reacts faster to price changes.

How AI Uses Technical Analysis

Our AI analyzes over 50 technical indicators simultaneously — something no human analyst can do. It recognizes convergences (when multiple indicators give a signal simultaneously) and weights the reliability of each indicator based on the current market phase.

Bottom Line: Technical analysis is not superstition — it is applied market psychology. Understanding the basics does not make you a chart expert, but it helps you better contextualize AI signals and make informed decisions.