Technical analysis reads the chart, not the company. The idea: price already reflects everything known, and patterns in price and volume hint at what comes next.
Technical analysis is the study of price charts to forecast likely future moves. Rather than digging into earnings or products — that's fundamental analysis — technicians assume the chart already prices in the news, and that the patterns of buyers and sellers tend to repeat. Learning to read a chart is step one.
A market is in an uptrend when it makes higher highs and higher lows, a downtrend when it makes lower highs and lower lows, and a range when it chops sideways. The oldest rule in the book — “the trend is your friend” — means trading with that direction, not against it.
Support is a price level where buyers have repeatedly stepped in, halting declines. Resistance is where sellers repeatedly appear, capping rallies. These levels act like a floor and ceiling — and when price decisively breaks through one, it often becomes the opposite (old resistance turns into new support).
Probabilities, not certainties: no pattern works every time. Technicians think in odds and always plan an exit for when the chart proves them wrong.
Critics note that patterns can be subjective and that price can move on news no chart predicted. Most disciplined traders treat technicals as a timing tool layered on top of solid risk management — not a crystal ball.
Try it risk-free: Spot trends, support and resistance on a live chart and act on them in the day trading simulator with play money — no sign-up, no real risk.
Not advice: educational content only. For authoritative basics see the SEC at investor.gov.
Related: how to read stock charts, candlestick patterns, and fundamental analysis basics.
It is the study of price charts and volume to forecast likely future moves. It assumes price already reflects known information and that buyer-seller patterns tend to repeat.
Support is a price level where buyers repeatedly step in and stop declines; resistance is where sellers repeatedly cap rallies. They act like a floor and ceiling until price breaks through.
It is the average price over a recent period, plotted as a line to smooth out noise and reveal the trend. Price crossing above or below it is a common signal.
No method is reliable every time. Technical analysis deals in probabilities, so disciplined traders combine it with strict risk management and a planned exit when the chart proves them wrong.