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CONTENTS
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Introduction page no.

CHAPTER 1 6 -9

Types of Charts
1.1: Line Charts:

1.2: Bar Charts:

1.3: Candlestick Chart:

CHAPTER –2 10-14

Trends
2.1: Market Trend and Range-Bound Consolidation:

2.2: Trendline

CHAPTER – 3 15-18

Channels

3.1: ascending channels

3.2 : descending channels
3.3 :rectangles channels

CHAPTER-4 19-42

Trading Classical Chart patterns

4.1 Double Tops and Bottoms:

4.2 Head and shoulder / Inverse H&S :

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4.3: Triangles: ( ascending,descending,rectangles)

4.4: Flag and Pennant:

4.5: Wedge:

4.6: Cub and Handle

CHAPTER-5 43-56

Candlestick Reversal Pattern

5.1: Hammer:

5.2: Inverted-Hammer

5.3:: Bullish Engulfing Pattern:

5.4: Morning Star:

5.5: Three white soldiers

5.6: Hanging Man:

5.7: Shooting Star:

5.8: Bearish Engulfing Pattern:

5.9: Evening star:

5.10: Three black crows:

5.11 Dark Cloud Cover:

5.12: Doji:

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CHAPTER -6 57-60

Indicators
6.1: Simple Moving Average:

6.2:RSI:

6.2.1: Calculation:

6.2.2: Usage:

6.3: MACD:
Conclusion

Pdf chart /candle

About U

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Introduction:

Market analysis is broadly categorized into two main methods, the first one is fundamental analysis
and the second one is technical analysis. In fundamental analysis an analyst needs to look at the
financial statements of a company, its business model, overall macroeconomic scenarios,
management capabilities and many more things for coming to a specific fair value of a company. On
the contrary the discipline of technical analysis is not at all concerned with this detailed study of
fundamental factors. On the contrary, a technical analyst only looks at price of a stock derived as a
result of supply-demand interaction. For a technical analysts’ price is supreme and he or she sees
price as manifestation of every fundamental reality. Hence, they look only at two main aspects in the
market. Price -over -time and volume. The entire discipline of technical analysis is based on these
two data points, price over time and volume. All patterns, indicators, concepts are derived from
these two basic data points. Technical analysis is a very interesting subject. This is not a definitive
science, rather a probabilistic discipline. In simple terms, it is more of an art than science. There are
well known chart patterns or indicators in the market. But nothing works 100% of time. We still
follow them because they work more number of times than they fail. Hence emerged the concept of
probability, the number of times anything works among the number of times that occur. This ratio is
different in different stocks in different phases. That is why it is called an art. With experience, a
chartist is able to form an opinion of his or her own so that he has some extra edge on the market
assessment than someone having just bookish knowledge of technical analysis. This book on
technical analysis is your stepping stone towards the journey to become a seasoned technical
analyst. We request you to go through the concept slowly one at a time and keep observing charts on
regular basis. Look at old charts and also look at contemporary live charts. Once you find a pattern or
some indicator try to predict the future move and note down your prediction. Then as time flows try
to match the price action with your prediction. Then analyze why it worked or not worked. Make
notes and progress with the e-book and the notes. This a long journey and we wish you best of luck.

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 CHAPTER -1

TYPES OF CHART

_________________________________________________________________________________________________________________

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CHAPTER - 1 Types of Charts

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Charts are two-dimensional representation of price over time. There are many types of charts
available. But most popular and widely used among them are Line Charts, Bar Charts and the
Candlestick Charts. The X axis, i.e. the time axis is crucial. The unit can be month, week, day, hour, 5
min or few seconds. The shorter the time period, more detailed the chart becomes. The beauty of
time in technical analysis is that the same concepts apply to charts irrespective of time-frame of
observation. However, the success rate of individual patterns or indicators-based decisions may vary
across time frames. Generally higher the time frame of chart, relatively higher is the probability of
any concept in market.

1.1: Line Charts:

In line chart each and every price point is represented as a dot. The X axis represents the time scale
and the Y axis represents the price. Each dot or point represents the closing price at the end of a unit
of time. These points are then joined to form a line. This is the simplest form of chart. But this is
quite good if we want to plot 3-4 similarly priced stocks in a single chart and compare. Moreover, the
line chart gives the clearest idea about price direction of a stock.

Figure 1.1: Line Chart

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1.2: Bar Charts:

A bar chart is comprised of a series of bars. Every bar has four important price points - open close
high and low. The bars are represented in green or blue color when close is higher than open and red
color when close is lower than open. The bar charts are more detailed than the line chart and are
good for demonstrating or spotting the classical price patterns. We will discuss about the classical
chart patterns in appropriate time.

1.3: Candlestick Chart:

The concept of candlestick charts came from Japan. That is why they are often referred to as
Japanese candlestick charts. These charts are the most versatile and popular form of chart
representation. Price behavior during each time unit is represented in the form of a candle. If the
closing price of a stock is higher than open price during a particular time period, then the candle is
green, if the close price is below the open price then the candle is red. Each candle has a body and
close is represented by the body of a candle and the upper and lower wicks represent the highs and
chart is special not only because it adds a special visual clarity about the price action, but also
because often a single candle stick or two or three consecutive candlesticks together form a pattern
that indicate reversal of a prior move or give conviction on continuation of the ongoing move. These
are called candlestick patterns. We will discuss about them in due course of time.

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 Figure 1. 3(a): Candlestick Chart Diagrammatic Representation Candlestick

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 CHAPTER – 2

Trends

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Chapter 2: Trends
2.1: Market Trend and Range-Bound Consolidation:

Often market movements happen in the form of trends. A price trend is a continuous or a directional
price movement in upward or downward direction. We call them up -trend and down -trend
respectively. Now if we look at price action in market through charts, we will find that no price
movement happens in a straight line. Suppose we are looking at a broader uptrend represented as
primary move, we may find intermediate corrections represented as secondary trend and minor
counter moves among the secondary moves represented as minor trend. This is how the market
behaves generally in both the up and the down trends.

fig :2.1(a) market trend

Often an up- trend is represented in the form of a sequence of higher highs and higher lows.
Similarly a downtrend is represented as a sequence of lower lows and lower highs. A trend is said to
reverse when the sequence is broken

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 Figure;2.1(b) : market downtrend

We should remember a simple point that market is not trending all the time. Often the market
consolidates within a small range and goes nowhere. Then suddenly it can break on the upside or
downside.

Figure:2.1(c): market consolidation

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2.2: Trendline :

Trendline and Channels are one of the most simple and useful tools in the market. During an
uptrend, a trendline is formed by joining lowest points of periodic pull-backs, defined as secondary
moves in the previous section. The up-trend line has positive slope. To be precise we need two lows
to join to form a trendline during an up-move. This line is then extended in the upward direction; the
third move towards the trend-line is used to validate the trend line. If the trend line is not broken in
the pull back, then it is called trend-line validation. It is often observed that price pulls back towards
the trend line and moves higher. In an uptrending market it is often easier to make money if one
buys near the trend line and sells higher. The more number of time the trend-line is validated, more
important it becomes. An upward trend line is said to be the area of support. The selling pressure
meets the buying pressure here and eventually overtime when buying pressure is higher than selling
pressure price sees an upward bounce. Figure 2.2(a): Uptrend Now when one buys he or she is
looking for the prices to move higher. But this may or may not happen. Hence the investor should
maintain a stop loss point below which he-or she should cut his position, i.e. book loss

Figure 2.2(a): Uptrend Now when one buys he or she is looking for the prices to move higher. But
this may or may not happen. Hence the investor should maintain a stop loss point below which he-or
she should cut his position, i.e. book loss. When a trend line is broken, either the market may reverse
the trend, continue the uptrend with little less force or just go sideways.

Figure 2.2(a): uptrend

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 Figure 2.2(b): downtrend

Figure: 2.2(a): Downtrend Similar to an uptrend-line, when a down trending trend line is broken the
trend may continue with less pace, or reverse or may go side-ways. A downward trend line is said to
be area of resistance. The selling pressure meets the buying pressure here and eventually overtime
when selling pressure is higher than buying pressure price sees a decline

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 Chapter -3
3: Channels

What is Channel Chart Pattern?

Channel Chart pattern is a type of technical analysis in which the price movement is
contained between the two parallel trend line and it is very easy to notice this pattern
in real charts.
Channels basically works on support and resistance. It consist of following parts:
1.Upper Trendline: It serves as a resistance in the pattern. It is a straight line and
atleast have 2 points, the more the better. When the price touches the upper trendline,
it can be used as a selling signal.
2.Lower Trendline: It is also a straight line and have atleast 2 points, the more the
better. It serves as a support in the pattern. When the price touches the lower trendline,
it can be used as a buying signal.

There are three types of channel pattern. They are:

1. Channel Ascending
2. Channel Descending
3. Channel Rectangle

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3.1 ascending channels :

What is Ascending Channel Chart Pattern?

It is also known as Bullish Channel pattern as the price is moving up. It consist of
two trendline parallel to each other having points forming higher highs and higher
lows hence resulting in bullish channel or upside channel. The price is confined
between the two trendlines. It consist of the following:

a. Ascending Upper Trendline: Also known as the channel line or secondary

trendline. This is drawn in parallel to the main trendline. It should have atleast two
consecutive points forming higher highs. More point in the trendline indicates more
strength in the pattern. The main trendline acts as a resistance in ascending channel
pattern.

b. Ascending Lower Trendline: Also known as the main trendline or primary

trendline. It is called so because it is the one which determines the trend. It serves as
an support in this pattern. It should also have a minimum of 2 consecutive lower lows
point. More points indicates more validity

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3.2 descending channels :

What is Descending Channel Chart Pattern?

It is also known as Bearish Channel. It consist of two trendline parallel to each other
having points forming lower highs and lower lows, thus forming a downside or bearish
channel. The price is confined between the two trendlines.
It consist of the following:

a. Descending Upper Trendline: Also known as the main trendline or primary

trendline. It is called so because it is the one which determines the trend. It should
have atleast two consecutive points forming lower highs. More point is the indication
of more strength in the pattern. The main trendline acts as a resistance in descending
Channel pattern

b. Descending Lower Trendline: Also known as the channel line or secondary

trendline. This is drawn in parallel to the main trendline. It serves as an support in this
pattern. It should also have a minimum of 2 consecutive lower lows point. More points
indicates more strength in the pattern

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3.3 rectangles channels :

What is Rectangle Channel Chart Pattern?

It is also known as Neutral Channel pattern. It consist of two trendline parallel to each
other having points forming equal highs and equal lows, thus forming a rectangular
or box shape. The price is confined between the two trendlines. It consist of the
following:

a. Horizontal Upper Trendline: Also known as the main trendline or primary

trendline. It is called so because it is the one which determines the trend. It should
have atleast two consecutive points forming equal highs. More point is the indication
of more strength in the pattern. The main trendline acts as a resistance in descending
Channel pattern.

b. Horizontal Lower Trendline: Also known as the channel line or secondary

trendline. This is drawn in parallel to the main trendline. It serves as an support in this
pattern. It should also have a minimum of 2 consecutive equal lows point. More points
indicates more strength in the pattern.

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 Chapter -4

Trading Classical Chart patterns

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4.1 Double Tops and Bottoms:

4.1.1- What is Double Top Pattern ?

Double top is a trend reversal chart pattern formed after good bullish price move (a
continuous price move for a good duration) where the upward price movement looses
its steam (first top) and it retraces a bit (to neck line or mid point). Then again it moves
in direction of original trend and reaches the first top level there by forming second
top. It again cannot move above first top and start moving to neckline. Once the neck
line is broken its fall in price is steep.

Understanding Double top in details

Double top is formed when the stock moves up for many days and the movement is
steep towards the end. And then it falls from there by about 10-15 %. After this it again
tries to move up and reaches level of previous high but cannot cross its previous high.
After this it again starts falling to a level of neckline. Once it retraces below neckline
a downtrend starts.

Please note that in actual practice, the two top may not be exactly at same level.
Generally, second top is a slightly lower level but 1-2 % higher then first level is also
acceptable. A significant higher second top may be dealt with lot of suspicion as it may
indicate continuation of uptrend .

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4.1.2 -What is Double Bottom Pattern?

Double Bottom is a bullish trend reversal chart pattern formed after good bearish price
move (a continuous price down for a good duration) where the downward price
movement looses its steam (first bottom) and it retraces a bit (to neck line or mid
point).

Then again it moves in direction of original trend and reaches the first bottom level
there by forming second bottom. It again cannot move down first bottom and start
moving to neckline. Once the neck line is broken uptrend is seen.

Understanding Double Bottom in details Double bottom is formed when the stock moves
down for many days and the movement is steep towards the end. And then it goes up from there
by about 10-15% . After this it again tries to move down and reaches level of previous low but
cannot cross its previous low. After this it again starts going up to a level of neckline. Once it
retraces above neckline a uptrend starts.
Please note that in actual practice, the two bottom may not be exactly at same level. Generally,
second bottom is a slightly higher level but 1-2 % lower then first level is also acceptable. A
significant lower second bottom may be dealt with lot of suspicion as it may indicate
continuation of downtrend. Shape of the bottoms can be from sharp and pointed to rounds one.

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4.2 Head and shoulder / Inverse H&S :

Head and Shoulder pattern is a very reliable pattern and that is reason of its popularity. It is a
reversal pattern and is formed after an uptrend.

Head and Shoulder pattern consist of the following:

1. Left Shoulder: In continuation of the uptrend the price goes up to forms a new high or first
peak known as left shoulder and then make a low.

2. Head: Continuing the left shoulder low, again the price goes up to a new high, higher than the
left shoulder forming a middle peak called as head of the pattern and come down.

3. Right Shoulder: It is formed when the price goes up again from the low of the head but not as
high as the Head and comes down forming third peak or right shoulder.

4. Neckline: It is the line drawn through the bottom of the the Left Shoulder, Head and the Right
Shoulder and serves as an important support for this pattern.

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Breakout: The pattern is only considered reliable and complete when the price goes
down and closes below the neckline and there is often increase in volume.

Shape: Theoretically Head and Shoulder pattern should be symmetrical. It means that
the left and right shoulders should form peak about the same price level and are
equally distanced from the Head. But practically you rarely seen such symmetrical Head
and Shoulder patterns in real time. However sometimes the left shoulder is higher then
the right shoulder or vice verse. But the head always have the highest peak. It is not
necessary also that the peaks formed in this pattern to be sharp, it may be pointed to
round shape. And therefore it is not necessary that neckline should be horizontal, it
can be sloping upwards or downwards.

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INVERSE head and shoulder :

Reverse Head And Shoulder Pattern is just opposite of Head and Shoulder Pattern. It is also a
very reliable pattern and that is reason of its popularity. It is a reversal pattern and is formed after
a downtrend.

Reverse Head and Shoulder pattern consist of the following:

1.Left Shoulder: In continuation of the downtrend the price goes down further to forms a new
low or first peak known as left shoulder and then make a high.

2.Head: Continuing the left shoulder high, again the price goes down to a new low, lower than
the left shoulder forming a middle peak called as head of the pattern and goes up to the
previous high.

3.Right Shoulder: It is formed when the price goes down again from the high of the head but
not as low as the Head and comes up again forming third peak or right shoulder.

4.Neckline: It is the line drawn through the top of the the Left Shoulder, Head and the Right
Shoulder and serves as an important support for this pattern

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Breakout: The pattern is only considered reliable and complete when the price goes up and
closes above the neckline and there is often increase in Volume.

Shape: Theoretically Head and Shoulder pattern should be symmetrical. It means that the left
and right shoulders should form peak about the same price level and are equally distanced from
the Head. But practically you rarely seen such symmetrical Head and Shoulder patterns in real
time. However sometimes the left shoulder is higher then the right shoulder or vice verse. But the
head always have the highest peak. It is not necessary also that the peaks formed in this pattern
to be sharp, it may be pointed to round shape. And therefore it is not necessary that neckline
should be horizontal, it can be sloping upwards or downwards.

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4.3: Triangles:

4.3.1 : ascending triangles :

Ascending Triangle Introduction

Ascending Triangle is formed when the stock fluctuates in a band such that upper price
range is near its Resistance Basics and and lower price is moving up (higher bottom)
continuously and there by reducing the price gap of highs and lows. From Bulls and
bears perspective, bulls are continuous trying to move the price up but are facing
strong supply at resistance but bears are failing to bring price down. Therefore, the
bottom line is continuously moving up forming lower part of triangle or a trend line
and upper resistance forms upper portion of the triangle (upper trend-line).

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4.3.2 Descending triangle :

Descending Triangle Introduction

Descending Triangles is an another popular chart pattern used by traders. It takes few
weeks to few months for this type of pattern to formed Usually it occurred at
a Downtrend Basics and it is a continuation pattern of high reliability. This pattern
consist of four parts:

1. Lower Horizontal(flat) trend line: It forms the Support Basics and generally have
at-least two points, more the better.

2. Upper descending(falling) trend line:It forms the Resistance Basics in the pattern
and have atleast two points, more the better.

3. Base: It is the vertical line drawn between lower flat trendline, at which the pattern
started to the trend line opposite to it. The value of base is used to keep the minimum
target amount.

4. Apex: It is the point where lower horizontal line and upper descending line meets. Some
traders used apex as the time in which the minimum targets is achieved.

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4.3.3 Symmetrical Triangle ;

Symmetric Triangle Chart Pattern

Symmetric Triangles is an another types of triangle chart pattern used by traders.

Again like ascending and descending triangle it takes few weeks to few months for
this type of pattern to formed. It is also a and it is a continuation pattern of high
reliability giving bearish signal in a Downtrend Basics and bullish in an Uptrend
Basics

This pattern also consist of four parts:

1. Lower Ascending trend-line: It forms the support and generally have at-least two
points, more the better.

2. Upper Descending (falling) trend-line: It forms the resistance in the pattern and
have at-least two points, more the better.

3. Base: It is the vertical line drawn between lower trend-line, at which the pattern
started to the trend-line opposite to it. The value of base is used to keep the
minimum target amount.

4. Apex: It is the point where lower Ascending line and upper Descending line meets. Some
traders used apex as the time in which the minimum targets is achieved.

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SK TRADING 33
4.4FLAG AND PENNANT:

(a) FLAG
Types of Flags: Depending on the direction of trend they are of two types.

1.Bullish Flag: It is formed in an uptrend. It is a bullish signal confirming that the uptrend may
continue further. It is a small pause, where the price is consolidated between the two parallel line
forming a rectangle flag, before the pattern continues.

2.Bearish Flag: It is formed in an downtrend. It is a bearish signal confirming that the downtrend
may continue further. It is a small pause, where the price is consolidated between the two parallel
line forming a rectangle flag, before the pattern continues.

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 BULLISH FLAG PATTERN

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 (b) PENNANT :

Types of Pennants: It is also of two types depending on the direction of the trend.

1.Bullish Pennants: It is formed in an uptrend. It is a bullish signal confirming that the uptrend
may continue further. It is a small pause, where the price is consolidated between the two
tapering converging trend line forming a triangle pennant, before the pattern continues

2.Bearish Pennants: It is formed in an downtrend. It is a bearish signal confirming that the

downtrend may continue further. It is a small pause, where the price is consolidated between the
two tapering converging trend line forming a triangle pennant, before the pattern continues.

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Bearish pennant

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4.5 Wedge

(A) Rising Wedge Pattern:

The rising wedge pattern has a bit of a resemblance to the symmetric triangles, but the
ascending wedge patterns form an angle whereas the triangle is mostly horizontally
constructed. This pattern represents a bearish nature, whether in an up-trending
market or a down-trending market. It usually shows up when a stock has been rising in
prices over a period of time, but can also be exhibited in the middle of a downward
trend. When the price trades outside the lower trendline, it is suggested that a potential
short trade be initiated.

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(B) Falling Wedge Pattern:

When a security price keeps falling over time, a wedge is formed. This wedge pattern is
bullish in nature and is formed by connecting lower highs with lower lows by drawing
slanted lines. If there is a breakout from the upper trendline, it is often a signal for a
potential long entry, but the trade can only be started after the clear breakout. Targets
for trading these patterns can be set at the highest swing high level of the wedge
pattern.

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4.6 Cup and Handle

Components of Cup and Handle Pattern: It consist of two parts.

1)A cup:

A cup formation happens when the price moving in a uptrend shows a pull back followed by a
consolidation period which makes the bottom of the cup and finally the reverse back to upside
continuing the uptrend. Usually in cup formation it makes equal highs at the corner of the cup with
the intermediate price ranges such that it will take a Bottom of a cup which serves as support for the
pattern as shown in the figure. Usually the pattern looks like a 'U' to round bottom. The duration for
the formation of a cup is usually from one month to several months. The cup should be considered
reliable only when it is less then half percentage of the preceding trend.The deeper the 'U' or round
shape the reliable the pattern is.

2) A handle:

After the formation of right highs of a round cup, there is a pull back before continuation of the
trend which forms the handle of this pattern. It is formed in the right hand side of the cup. The
duration for the formation of a handle is usually from 1 week to several weeks. The handle should be
considered reliable only when it is formed in the top half of the cup formed as shown in the figure.

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 CHAPTER – 5

Candlestick

Patterns

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bullish candlestick pattern

5.1. HAMMER:

Hammer
The hammer candlestick pattern is formed of a short body with a
long lower wick, and is found at the bottom of a downward trend.

A hammer shows that although there were selling pressures during

the day, ultimately a strong buying pressure drove the price back
up. The colour of the body can vary, but green hammers indicate a
stronger bull market than red hammers.

Hammer candle

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5.2 Inverse hammer:
A similarly bullish pattern is the inverted hammer. The only
difference being that the upper wick is long, while the lower wick is
short.It indicates a buying pressure, followed by a selling pressure
that was not strong enough to drive the market price down. The
inverse hammer suggests that buyers will soon have control of the
market.

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\

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5.3 Bullish engulfing:

The bullish engulfing pattern is formed of two candlesticks. The first

candle is a short red body that is completely engulfed by a larger
green candle.

Though the second day opens lower than the first, the bullish
market pushes the price up, culminating in an obvious win for
buyers.

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5.4 Morning star:
The morning star candlestick pattern is considered a sign of hope in
a bleak market downtrend. It is a three-stick pattern: one short-
bodied candle between a long red and a long green. Traditionally,
the ‘star’ will have no overlap with the longer bodies, as the market
gaps both on open and close.

It signals that the selling pressure of the first day is subsiding, and a
bull market is on the horizon.

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5.5 Three white soldiers:

The three white soldiers pattern occurs over three days. It consists
of consecutive long green (or white) candles with small wicks, which
open and close progressively higher than the previous day.

It is a very strong bullish signal that occurs after a downtrend, and

shows a steady advance of buying pressure.

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5.6 Hanging man:
The hanging man is the bearish equivalent of a hammer; it has the
same shape but forms at the end of an uptrend.

It indicates that there was a significant sell-off during the day, but
that buyers were able to push the price up again. The large sell-off
is often seen as an indication that the bulls are losing control of the
market.

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5.7 Shooting star:

The shooting star is the same shape as the inverted hammer, but is
formed in an uptrend: it has a small lower body, and a long upper
wick.

Usually, the market will gap slightly higher on opening and rally to
an intra-day high before closing at a price just above the open – like
a star falling to the ground.

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5.8 Bearish engulfing:

A bearish engulfing pattern occurs at the end of an uptrend. The

first candle has a small green body that is engulfed by a
subsequent long red candle.

It signifies a peak or slowdown of price movement, and is a sign of

an impending market downturn. The lower the second candle goes,
the more significant the trend is likely to be.

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5.9 Evening star:

The evening star is a three-candlestick pattern that is the equivalent

of the bullish morning star. It is formed of a short candle
sandwiched between a long green candle and a large red
candlestick.

It indicates the reversal of an uptrend, and is particularly strong

when the third candlestick erases the gains of the first candle.

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5.10 Three black crows:

The three black crows candlestick pattern comprises of three

consecutive long red candles with short or non-existent wicks. Each
session opens at a similar price to the previous day, but selling
pressures push the price lower and lower with each close.

Traders interpret this pattern as the start of a bearish downtrend, as

the sellers have overtaken the buyers during three successive
trading days.

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5.11 Dark cloud cover:

The dark cloud cover candlestick pattern indicates a bearish

reversal – a black cloud over the previous day’s optimism. It
comprises two candlesticks: a red candlestick which opens above
the previous green body, and closes below its midpoint.

It signals that the bears have taken over the session, pushing the
price sharply lower. If the wicks of the candles are short it suggests
that the downtrend was extremely decisive.

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5.12 Doji:

When a market’s open and close are almost at the same price
point, the candlestick resembles a cross or plus sign – traders
should look out for a short to non-existent body, with wicks of
varying length.

This doji’s pattern conveys a struggle between buyers and sellers

that results in no net gain for either side. Alone a doji is neutral
signal, but it can be found in reversal patterns such as the bullish
morning star and bearish evening star.

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 CHAPTER - 6

INDICATORS:

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6.1: Simple moving average:

A moving average can also act as support or resistance. In an uptrend, a

50-day, 100-day, or 200-day moving average may act as a support level,
as shown in the figure below. This is because the average acts like
a floor (support), so the price bounces up off of it. In a downtrend, a
moving average may act as resistance; like a ceiling, the price hits the
level and then starts to drop again.

Moving Average Length

Common moving average lengths are 10, 20, 50, 100, and 200. These
lengths can be applied to any chart time frame (one minute, daily, weekly,
etc.), depending on the trader's time horizon. The time frame or length you
choose for a moving average, also called the "look back period," can play
a big role in how effective it is.

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6.2 RSI (relative strength index):

The relative strength index (RSI) is a momentum indicator used in

technical analysis that measures the magnitude of recent price changes to
evaluate overbought or oversold conditions in the price of a stock or other
asset

The Formula for the RSI

The RSI is computed with a two-part calculation that starts with the
following formula:

RSIstep two=100−[1+((Previous Average Loss×13) + Current Loss)(Previous Average Gain×13) + Current Gain
100]

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6.3 MACD( Moving average convergence divergence):

Moving average convergence divergence (MACD) is a trend-

following momentum indicator that shows the relationship between
two moving averages of a security’s price. The MACD is calculated by
subtracting the 26-period exponential moving average (EMA) from the 12-
period EMA.

MACD Formula
\text{MACD}=\text{12-Period EMA }-\text{ 26-Period
EMA}MACD=12-Period EMA − 26-Period EMA

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CONCLUSION

Conclusion Ideally traders combine indicators and price patterns to form their trading strategies.
Very rarely professional traders just rely on a single indicator or a price pattern. We are about to end
our short journey of introducing you with the concept of basic charting. Hope this gives you enough
clarity and generates great interest in your mind to apply those concepts in live charts. Technical
analysis is a discipline in which a practitioner improves and learns with time and practice. We wish
you all the best in your journey

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