Chapter 6: Technical Analysis
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Day 29: Technical Analysis — Reading Market Charts
The price chart tells a story — here's how to read it
2 min read
📖 The Doctor Analogy
When a doctor wants to understand a patient's health, she doesn't just look at them — she reads the blood pressure history (trends), the previous test reports (past data), and the weight chart over months (price chart).
A technical analyst does exactly the same thing for stocks. She studies the price history, volume patterns, and chart formations to predict where the price might go next.
Will it always be right? No. But neither is medical diagnosis. The point is to improve your odds using all available evidence. 🩺
When a doctor wants to understand a patient's health, she doesn't just look at them — she reads the blood pressure history (trends), the previous test reports (past data), and the weight chart over months (price chart).
A technical analyst does exactly the same thing for stocks. She studies the price history, volume patterns, and chart formations to predict where the price might go next.
Will it always be right? No. But neither is medical diagnosis. The point is to improve your odds using all available evidence. 🩺
Technical Analysis — What It Is
Using historical price charts and volume data to forecast future price movements.
The core assumption: "Price reflects everything." All known information — news, fundamentals, sentiment — is already baked into the price. So study the price.
Fundamental Analysis: "Is this a good company?" (Financial statements, ratios)
Technical Analysis: "Where is this stock's price going, and when?" (Charts, indicators)
The best investors use BOTH. Buy fundamentally great companies at technically good entry points.
The core assumption: "Price reflects everything." All known information — news, fundamentals, sentiment — is already baked into the price. So study the price.
Fundamental Analysis: "Is this a good company?" (Financial statements, ratios)
Technical Analysis: "Where is this stock's price going, and when?" (Charts, indicators)
The best investors use BOTH. Buy fundamentally great companies at technically good entry points.
Three Pillars of Technical Analysis
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1. History Repeats
Markets exhibit recurring patterns. Study them.
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2. Price Discounts All
Every fact, rumour and expectation is already in the price.
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3. Trend is Your Friend
Go with the trend. Trading against it is expensive education.
Chart Types
| Chart Type | What It Shows | Best For |
|---|---|---|
| Line Chart | Only closing prices — simple trend line | Quick overview, long-term trends |
| Bar Chart (OHLC) | Open, High, Low, Close — vertical bars | Professional traders |
| Candlestick 🕯️ | OHLC + visual body — most intuitive | Everyone — most commonly used |
Timeframes for Different Goals
One candle = one time period's data.
📅 1-minute/5-minute: Scalpers only. If you need this, you don't need this course — you need therapy.
📅 15-minute: Intraday traders
📅 1-hour: Swing traders (3–10 day trades)
📅 Daily: Delivery investors ← START HERE as a beginner
📅 Weekly/Monthly: Long-term investors and fund managers
📅 1-minute/5-minute: Scalpers only. If you need this, you don't need this course — you need therapy.
📅 15-minute: Intraday traders
📅 1-hour: Swing traders (3–10 day trades)
📅 Daily: Delivery investors ← START HERE as a beginner
📅 Weekly/Monthly: Long-term investors and fund managers
🎯 Today's Takeaway:
Technical analysis = chart study to predict price direction. Three pillars: history repeats, price discounts all, trend is friend. Start with daily charts. Tomorrow: Candlestick charts — 300-year-old Japanese wisdom that still works!
Technical analysis = chart study to predict price direction. Three pillars: history repeats, price discounts all, trend is friend. Start with daily charts. Tomorrow: Candlestick charts — 300-year-old Japanese wisdom that still works!