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Understanding Basics of Technical Analysis: Charts and Candlesticks

This overview introduces the fundamentals of technical analysis, focusing on essential chart types including line charts and bar charts. A line chart depicts closing prices, while a bar chart summarizes session price movements through open, high, low, and close values. Key concepts such as support and resistance, double tops/bottoms, and candlestick patterns are discussed. Candle patterns, originating from Japan, provide visual insights for predicting market actions, with types like Bull and Bear Candles, Doji, and engaging formations such as Engulfing Lines and Hammers.

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Understanding Basics of Technical Analysis: Charts and Candlesticks

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  1. Basics of Technical Analysis

  2. Line Chart A line chart shows the line connecting the closing prices.

  3. Bar Chart The bar chart is composed of a high (highest price during a session), a low (lowest price during a session), open and close. We draw a vertical line using a high price and low price and set a horizontal dot from to the right of the vertical line representing the closing price and from left representing the opening price.

  4. Support Support is a term used in technical analysis indicating a specific price level at which the price will have inability to cross below.

  5. Resistance Resistance is a term used in technical analysis indicating a specific price level at which the price will have inability to cross above.

  6. Double Top/M-Top Double top indicates that the market is falling twice at a resistance and is reversing then sharply. A break of the support would indicate further fall in the price indicating a bearish trend.

  7. Double Bottom/ W- Top Double Bottom indicates that the market is falling twice at a support and is reversing then sharply. A break of the resistance would indicate further rise in the price indicating a bullish trend.

  8. Candle Sticks The candle stick patterns have originated from Japan. The candlestick patterns provide a better visual perspective to predict the future market action than bars. There are basically two types of candle stick i.e. • Bull Candle • Bear Candle

  9. Bull Candle Bear Candle

  10. Candle Sticks Patterns • Doji • Dragonfly Doji • Gravestone Doji • Spinning Top • Bearish Engulfing Lines • Bullish Engulfing Lines • Falling Three Methods • Rising Three Methods • Three Black Crows • Three White Soldiers • Tweezer Top and Tweezer Bottom • Hammer and Inverted Hammer • Shooting Star

  11. Doji

  12. Dragonfly Doji

  13. Gravestone Doji

  14. Spinning Top

  15. Bearish Engulfing Lines

  16. Bullish Engulfing Lines

  17. Falling Three Methods

  18. Rising Three Methods

  19. Three Black Crows

  20. Three White Soldiers

  21. Tweezer Bottom

  22. Tweezer Top

  23. Hammer

  24. Inverted Hammer

  25. Shooting Star

  26. Shooting Star

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