Technical Analysis Basics
Technical analysis is the study of price charts and indicators to forecast future price movements. It’s based on the premise that historical price patterns tend to repeat.
Chart Types
Candlestick Charts (Most Popular)
Each candlestick shows four prices for a time period:
- Open — where the price started
- High — the highest price reached
- Low — the lowest price reached
- Close — where the price ended
A green/white candle means the close was higher than the open (bullish). A red/black candle means the close was lower (bearish).
Line Charts
Simple line connecting closing prices. Good for seeing overall trend direction but less detail.
Bar Charts
Similar information to candlesticks but in a different visual format.
Support and Resistance
Support is a price level where buying pressure tends to prevent further decline. Think of it as a “floor.”
Resistance is a price level where selling pressure tends to prevent further advance. Think of it as a “ceiling.”
Key principles:
- When support breaks, it often becomes resistance (and vice versa)
- The more times a level is tested, the more significant it is
- Round numbers often act as psychological support/resistance
Trend Analysis
Uptrend: Series of higher highs and higher lows Downtrend: Series of lower highs and lower lows Sideways/Range: Price moving between horizontal support and resistance
“The trend is your friend” — trading in the direction of the prevailing trend has a higher probability of success.
Essential Indicators
Moving Averages (MA)
Smooth out price data to identify trend direction.
- SMA (Simple Moving Average) — equal weight to all periods
- EMA (Exponential Moving Average) — more weight to recent prices
Common settings: 20 EMA (short-term), 50 EMA (medium), 200 EMA (long-term)
Signal: When a faster MA crosses above a slower MA, it suggests bullish momentum (and vice versa). Our SteadyPips EA uses this exact strategy with 12/26 EMA crossovers.
RSI (Relative Strength Index)
Measures the speed and magnitude of price changes on a 0-100 scale.
- Above 70 = Overbought (potential reversal down)
- Below 30 = Oversold (potential reversal up)
ATR (Average True Range)
Measures market volatility. Higher ATR = more volatile market.
Used for:
- Setting stop losses (e.g., 1.5x ATR below entry)
- Filtering trades (avoid low-volatility periods)
- Position sizing
Our EAs use ATR extensively for dynamic stop loss and take profit placement.
Putting It Together
A basic technical analysis routine:
- Identify the trend on a higher timeframe (Daily/H4)
- Find key support/resistance levels
- Look for entry signals on your trading timeframe
- Confirm with indicators (MA direction, RSI not extreme)
- Set stop loss and take profit using ATR or structure levels
Automated Technical Analysis
Expert Advisors like SteadyPips automate this entire process:
- Continuous trend monitoring via EMAs
- ATR-based volatility filtering
- Automatic entry when conditions align
- Dynamic risk management
This article is for educational purposes only and does not constitute financial advice. Past performance is not indicative of future results.