Remember the first time you learned how to ride a bike without training wheels? The training wheels helped you stay on the bike, and gave you confidence to get back on.

The way training wheels kept you on the bike is similar to how technical analysis keeps you in a profitable trade (when applied in used correctly).

So, if you’re interested in trading in the forex market, the stock market or other financial markets, technical analysis is an essential tool that can help you make better investment decisions. Technical analysis involves using charts and other technical indicators to study price movements and other market trends. Here’s a step-by-step guide on how to do technical analysis:

Step 1: Understand the basics

Before you start doing technical analysis, it is essential to understand the basics of the forex market, including supply and demand, economic cycles, and trends. You should also have a good understanding of different types of charts, including line charts, bar charts, and candlestick charts.

We use candlestick charts, however some students find bar charts equally helpful to time their trades. The charts you pick will come down to your preference.

To do technical analysis for results, keep in mind that timeframes matter. What works on the daily timeframe might yield different results on the 15 minute or 5 minute.

Let’s continue the next important choice. Which technical indicators will you use?

Step 2: Choose your indicators

There are hundreds of technical indicators available, but it is essential to choose the ones that best suit your investment style and goals. Some popular indicators include moving averages, Bollinger bands, relative strength index (RSI), and MACD. You should also learn about support and resistance levels, which are price levels where stocks tend to bounce off or break through.

After years of trial and error, there’s one technical indicator that continues to offer great trading results.

The Exponential Moving Averages, (aka: EMAs), on different timeframes help new traders stay in trades longer and exit loosing trades sooner.

Step 3: Analyze the chart

Once you have chosen your indicators, it is time to analyze the chart. Start by looking at the long-term trend of the stock, as well as any short-term fluctuations. Identify any patterns or trends that emerge, and look for signals that indicate a change in the trend or momentum.

Step 4: Look for confirmation

Before making any investment decisions based on technical analysis, it is essential to look for confirmation from other sources, including fundamental analysis, news, and market sentiment. This will help you avoid making rash decisions based solely on technical indicators.

Step 5: Develop a trading plan

Once you have analyzed the chart and gathered confirmation, it is time to develop a trading plan. This plan should include entry and exit points, stop-loss levels, and profit targets. You should also have a clear understanding of your risk tolerance and be prepared to adjust your plan as market conditions change.

Document all of your results. Your results will be based on how well you keep track of your technical analysis.

After a few weeks of consistently reviewing each trade, you’ll notice how your eyes naturally “see” each trade before it happens. You’ll get to a natural point along your journey where you’re able to remove all technical analysis tools off of your charts.

Step 6: Monitor your trades

Finally, it is essential to monitor your trades and adjust your plan as necessary. Technical analysis is not a foolproof method, and market conditions can change rapidly. By keeping a close eye on your trades and making adjustments as necessary, you can increase your chances of success in the market.

Conclusion

Technical analysis is an essential tool for investors who want to make informed decisions in the stock market. By understanding the basics, choosing the right indicators, analyzing the chart, looking for confirmation, developing a trading plan, and monitoring your trades, you can increase your chances of success and achieve your investment goals. Remember that technical analysis is just one tool in your investment arsenal, and it should be used in conjunction with other methods, including fundamental analysis and market sentiment.

What questions do you have about technical analysis? If you’re not getting the consistent results you feel you should, reach out to us for a one-to-one consult here.