Technical analysis is the study of price charts and trading volumes to understand where the market will go next. It doesn't care what the company does or how much it earned. According to its supporters, all necessary information is already reflected in the price.
Three Postulates
- Price accounts for everything. News, reports, expectations — all are already factored into the quote.
- Price moves in trends. A movement that has begun is more likely to continue than reverse.
- History repeats itself. Market participants react similarly to similar situations, so chart patterns work again and again.
Trend — the Foundation of Everything
An uptrend is a series of rising highs and lows. A downtrend is the opposite. A sideways trend is when price moves within a range. The first thing a technical analyst does is determine which phase the asset is in and trade in its direction. Trading against the trend is the most common reason for beginner losses.
Support and Resistance Levels
Support is a price zone where buyers previously stopped the decline. Resistance is where sellers stopped the rise. Price often bounces off these zones, and breaking through them signals a change in sentiment. Levels are visible to the naked eye: simply mark where the chart reversed several times.
Chart Patterns
Repeating patterns on the chart: "head and shoulders," "double bottom," "triangle," "flag." Each pattern has a typical continuation — for example, breaking through a "triangle" usually produces a move equal to its base.
Indicators
Mathematical formulas applied to the chart. The most popular:
- Moving averages — smooth price and show trend direction.
- RSI — relative strength index, signals overbought or oversold conditions.
- MACD — shows momentum and reversal points.
- Volume — confirms move strength: a rise on high volume is more reliable than on low volume.
Timeframes
The same asset looks different on a minute chart versus a weekly chart. Rule: determine the trend on a higher timeframe, and find entry points on a lower one. A swing trader watches daily and four-hour charts, a scalper watches minute charts.
Where Technical Analysis Works Worse
On illiquid markets where there are few trades, charts are choppy and levels are blurred. Many Tashkent stocks trade infrequently, so classic patterns work less often than on currencies or major foreign securities. Also, technical analysis is powerless against unexpected news.
How to Start
- Open a chart of any liquid asset on a daily timeframe.
- Determine the trend and mark 2–3 key levels.
- Add one moving average and RSI — no more.
- Observe for a month, recording assumptions and results.
Remember: technical analysis does not predict the future, it assesses probabilities. Its strength lies in combining it with risk management, not in finding the "perfect signal."