Technical Analysis Summary
Condensed overview of the Technical Analysis Handbook. For full detail and examples, use the Handbook and Revision materials.
1. Market Basics
Markets: Price discovery via matching of buy/sell orders. Liquidity = ability to trade without moving price much. Order flow imbalance drives short-term moves.
Participants: Retail, institutional, market makers, HFT. Each affects liquidity and volatility.
Bid/Ask/Spread: Bid = best buy price; Ask = best sell price; Spread = cost of round-trip. Slippage = fill worse than quote.
Order types: Market (immediate); Limit (at price or better); Stop (triggers market order at level); Stop-limit (triggers limit at level).
Sessions: Asian, London, NY. London+NY overlap = highest FX volatility. Equities: open/close spikes; VWAP and session high/low matter intraday.
Links: 01 Market Basics
2. Price Action
Support/Resistance: Levels where price tends to hold or reverse. Multiple touches strengthen level; break + retest = role reversal (resistance becomes support).
Trendlines: Uptrend line along higher lows; downtrend line along lower highs. Channels = parallel boundaries. Break of trendline can signal weakening trend.
Structure: Uptrend = HH + HL; downtrend = LH + LL. Break of structure (BOS) = break of prior HH or LL (continuation or new trend). Market structure shift (MSS) = e.g. first LL in uptrend = bearish shift.
Liquidity: Stops cluster above highs / below lows. Liquidity grab = sweep of those levels then reversal; use as setup or avoid placing stops exactly there.
Range vs trend: Range = horizontal S/R; trade fades or wait for breakout. Trend = trade in direction with structure (pullbacks, BOS).
Links: 02 Price Action
3. Candlestick Analysis
Anatomy: Body (open–close); wicks (rejection at high/low). Context (trend, level) matters more than pattern alone.
Single: Doji (indecision); Hammer (bullish at support); Hanging Man / Shooting Star (bearish at top); Inverted Hammer (bullish at support); Marubozu (strong body).
Two: Bullish/Bearish Engulfing; Piercing Line; Dark Cloud Cover; Tweezer Top/Bottom. Confirm with next candle.
Three: Morning Star (bullish); Evening Star (bearish); Three White Soldiers / Three Black Crows; Inside Bar (breakout); Outside Bar (expansion). Entry on confirmation; stop beyond pattern.
Links: 03 Candlestick Analysis
4. Chart Patterns
Reversal: Head & Shoulders (break below neckline); Inverse H&S (break above); Double/Triple Top/Bottom; Rounded Top/Bottom. Measured move = height projected from break. Volume confirms break.
Continuation: Bull/Bear Flag (break in trend direction; target = flagpole length); Pennant; Ascending/Descending/Symmetrical Triangle; Rectangle; Cup and Handle. Stop opposite side of pattern.
Breakouts: Require close beyond level and preferably volume. False breakouts common—retest or buffer stop. Invalidate if price closes back inside.
Links: 04 Chart Patterns
5. Technical Indicators
Trend: MA, EMA (9,20,50,200); VWAP (intraday); Ichimoku (cloud, Tenkan, Kijun); Parabolic SAR (trailing stop). Best in trending markets.
Momentum: RSI (0–100; >70 overbought, <30 oversold; divergence); MACD (crossover, zero line, divergence); Stochastic; CCI. Use in range for mean reversion; in trend for divergence.
Volatility: Bollinger Bands (squeeze, band touches); ATR (stops, targets); Keltner. No direction—only size of move.
Volume: Volume profile (POC, value area); OBV; A/D; VWAP Anchored. Confirm breakouts and trend.
Links: 05 Technical Indicators
6. Advanced Concepts
Order blocks: Last opposing candle before strong move; zone for retest (support/resistance). Trade with structure.
Liquidity zones: Above highs / below lows; sweeps = liquidity grab. Don’t place stops exactly there.
Fair Value Gap (FVG): Three-candle imbalance; often filled. Entry on fill in trend direction.
Wyckoff: Accumulation (spring = false breakdown) → markup; Distribution (upthrust = false breakout) → markdown. Volume confirms.
Links: 06 Advanced Concepts
7. Trading Strategies
Trend following: Pullbacks to structure (HL, EMA); BOS confirmation. Stop below HL (long). R:R 1:2 or 1:3.
Breakout: Close beyond range/pattern; volume; stop opposite side; target = measured move.
Mean reversion: Fade at support/resistance (and RSI/Stochastic). Best in range. Tight stop; 1:1 or 1:1.5 R:R.
Scalp: Short hold; small target; tight stop; liquid names; factor in costs.
Swing: Multi-day; 4H/daily structure; stop below swing low; target next structure or 1:2 R:R.
Position: Weekly/daily; wide stop; small size; trail structure.
Links: 07 Trading Strategies
8. Risk Management & Psychology
Position size: Dollar risk = Account × Risk% (e.g. 1%). Size = Dollar risk / |Entry − Stop|. Stop defined before entry.
R:R: Aim ≥ 1:1.5 or 1:2. Expectancy = (Win% × Avg win) − (Loss% × Avg loss) > 0.
Drawdown: Plan for 10–20%. Reduce size or pause after limit. No doubling up to recover.
Psychology: Discipline (follow plan); avoid revenge trading and overtrading; journal every trade; written trading plan; awareness of biases (confirmation, recency, FOMO).
Links: 08 Risk Management | 09 Trading Psychology
9. Backtesting & Algo
Backtest: Rules on historical data; include costs; avoid look-ahead and overfitting. Metrics: win rate, expectancy, max drawdown, profit factor.
Walk-forward: Optimize in-sample; test out-of-sample; roll forward. Forward test (paper/small live) before full size.
Algo: Code rules → backtest → paper → live. APIs for data and execution; Python (pandas, backtrader/vectorbt).
Links: 10 Backtesting | 11 Algorithmic Trading
10. Common Mistakes
No plan, no stop, oversized position, chasing, too many symbols/timeframes, no journal.
Indicator overload → use few; filter by context. Ignoring context → don’t trade same signal in all conditions.
Overleveraging → cap leverage; size by risk%. Chasing → wait for setup; “no trade” is OK.
Links: 12 Common Mistakes | Revision
Last updated