How to Analyze Charts: Complete Guide
Technical analysis is reading price charts to predict future price movements. Here’s how to do it properly.
Step 1: Read Price
Candlestick Basics
Each candlestick shows:
- Open - Starting price
- High - Highest price
- Low - Lowest price
- Close - Ending price
Candlestick Patterns
| Pattern | Meaning | Signal |
|---|---|---|
| Hammer | Lower wick, bullish body | Bullish reversal |
| Shooting star | Upper wick, bearish body | Bearish reversal |
| Doji | Equal open/close | Indecision |
| Engulfing | Body engulfs previous | Trend reversal |
Step 2: Identify Structure
Trend Identification
Uptrend: Higher highs + Higher lows
Downtrend: Lower highs + Lower lows
Range: Bounded between S/R
How to Draw Trendlines
- Connect at least 2-3 swing points
- Uptrend: Connect lows
- Downtrend: Connect highs
Step 3: Find Support & Resistance
How to Find Levels
- Recent highs/lows - Previous pivots
- Round numbers - 1.1000, 1.2000
- Moving averages - Dynamic levels
Testing Levels
- Multiple tests = stronger level
- Rejection = valid level
- Break + close = level broken
Step 4: Add Indicators
Essential Indicators
| Indicator | Purpose |
|---|---|
| 50 SMA | Medium trend |
| 200 SMA | Long-term trend |
| RSI | Momentum |
| Volume | Confirmation |
Indicator Rules
- Never more than 3 indicators
- Use as confirmation only
- Price is always primary
Step 5: Find Entry Setups
Common Setups
Trend Pullback
- Uptrend confirmed
- Price pulls back to 50 EMA
- Bounce with bullish candle
- Enter on close above candle
Breakout
- Consolidation forms
- Price breaks resistance
- Volume spike confirms
- Enter on close above
Step 6: Multi-Timeframe Analysis
How to Use
- Daily - Direction (buy/sell)
- 4H - Setup (entry trigger)
- 1H - Timing (exact entry)
Process
Check Daily: "Trend is UP"
Check 4H: "Price at support"
Check 1H: "Entry signal forms"
Enter!
Step 7: Confirm with Price Action
Confirmation Checklist
☐ Trend matches
☐ At key level
☐ Indicator agrees
☐ Price action confirms
When NOT to Trade
- No clear trend
- No key level nearby
- Indicators conflict
- Price action unclear
Common Analysis Mistakes
1. Overcomplicating
Problem: 10+ indicators
Solution: Use 2-3 max
2. Ignoring Trend
Problem: Trading against trend
Solution: Always with trend
3. No Level Identification
Problem: Trading anywhere
Solution: Always identify S/R first
Analysis Tools
- TradingView - Best charts
- RSI Guide - Momentum
- MACD Guide - Trend momentum
Read charts first. Indicators second.