# Technical analysis

<br>

## What's technical analysis

* uses trading data to analyse and predict price patterns
* gives us data points to compare and contrast
* uses chart patterns, price data, trading volume and indicators
* allows us to follow a systematic strategy that can be improved
* cannot predict the future


<br>

---

## Candlestick charts

* data rich trading analysis
* time and price details
* traders use candlestick chat patterns to antecipate the future
* show market high and low for a given time period
* each candle is a period in time
* tells: open/close (body) high/low (wick) for a period of time

<br>

<p align="center">
<img src="https://user-images.githubusercontent.com/1130416/172071731-4cfd9c34-e7c9-4bff-84b1-ec3144ed7516.png" width="20%" align="center" style="padding:1px;border:1px solid black;" >
<img src="https://user-images.githubusercontent.com/1130416/172071770-3cfa971d-28bd-4532-bd48-324a256091b8.png" width="20%" align="center" style="padding:1px;border:1px solid black;" >
 
</p>

<br>

### Hammer pattern

* bullish pattern
* sellers drove price lower during the day
* buyers came in and the price finished higher
* will continue tomorrow?
* where are open, close, high, low?


<br>
<p align="center">
<img src="https://user-images.githubusercontent.com/1130416/172071878-e34d61ca-61ba-4ba0-b2b5-7f75cd8efa4a.png" width="40%" align="center" style="padding:1px;border:1px solid black;" >
</p>


<br>

### Shooting star pattern

* bearish pattern
* buyers drove price high
* sellers won and price fell lower
* will this continue tomorrow?


<br>
<p align="center">
<img src="https://user-images.githubusercontent.com/1130416/172071957-7c5ff9f4-957a-4cb8-89b1-c091cf4c4cc0.png" width="40%" align="center" style="padding:1px;border:1px solid black;" >
</p>
<br>

### Bullish engulfing pattern

* bullish pattern
* bullish candlestick "engulfed" the bearish candlestick
* represents a strong reversal in the price action
* will continue tomorrow?

<br>
<p align="center">
<img src="https://user-images.githubusercontent.com/1130416/172072021-91b32a2a-08e8-4c68-9756-111ae05764b1.png" width="40%" align="center" style="padding:1px;border:1px solid black;" >
</p>
<br>

### Bearish engulfing pattern

* bearish pattern
* bearish candlestick engulfed the bullish candlestick 
* represents a string reversal in the price action
* will continue tomorrow?

<br>
<p align="center">
<img src="https://user-images.githubusercontent.com/1130416/172072097-e9058226-65b4-43ff-a017-f2a235691fc6.png" width="40%" align="center" style="padding:1px;border:1px solid black;" >
</p>
<br>

----

## Chart patterns

* used in conjuction with candlestick charts
* longer-term analysis of market movements
* bullish and bearish patterns
* used with day trading and swing trading
* dont tell about longer term trends


### Double top

* bearish pattern
* buyers tried wtice to push price higher
* buyers unable to push price higher
* price has no moment at this level
* buyers run ot of steam
* sellers are in the market



<br>
<p align="center">
<img src="https://user-images.githubusercontent.com/1130416/172072239-54e95e3f-df11-4ec9-92a2-737ec05c1fd9.png" width="40%" align="center" style="padding:1px;border:1px solid black;" >
</p>
<br>

### Double bottom

* bullish pattern
* sellers came in twice
* price found support of buyers twice
* buyers happy to pay up
* sellers may run out and buyers need to pay more
* buyers are in the market




<br>
<p align="center">
<img src="https://user-images.githubusercontent.com/1130416/172072325-c19f5111-abf3-4c38-8e18-9a1e3526ea11.png" width="40%" align="center" style="padding:1px;border:1px solid black;" >
</p>
<br>


### Asceding triangle

* charts never trade in a straight line
* charts trend
* highs and lows are important
* consolidation is imporant
* higher highs or higher lows is bullish
* narrowing of a range can preceed a breakout


<br>
<p align="center">
<img src="https://user-images.githubusercontent.com/1130416/172072378-59cffb28-7589-44fc-8e54-b040ec239496.png" width="40%" align="center" style="padding:1px;border:1px solid black;" >
</p>
<br>


---


## Trends


* we can't trade from patterns all the time, they are quite rare
* trends patterns will guide us more often
* patterns can be housed within trends
* if we can find the trend, we can ride the trend for profit

<br>

### Asceding wedge - higher lows


<br>
<p align="center">
<img src="https://user-images.githubusercontent.com/1130416/172072540-324afc3d-0b31-4ffd-ab4f-96a829d244bf.png" width="40%" align="center" style="padding:1px;border:1px solid black;" >
</p>
<br>

### Desceding wedge - lower highs


<br>
<p align="center">
<img src="https://user-images.githubusercontent.com/1130416/172072564-59a193ef-f374-4924-8c0c-ddda21487675.png" width="40%" align="center" style="padding:1px;border:1px solid black;" >
</p>
<br>

### Consolidation

* give us a strong area of trade where traders have been before
* area in the chart moving sideways
* we can use consolidation as a guide for our entry/exit points
* sometimes preceed breakup
* where buyers/sellers are at equilibrium and can't last forever
* use these levels for our stop loss levels

<br>
<p align="center">
<img src="https://user-images.githubusercontent.com/1130416/172072655-e0b13963-4b68-4641-9c6b-888a4fc9a5f1.png" width="40%" align="center" style="padding:1px;border:1px solid black;" >
</p>
<br>

### Support and resistance

* support and resistance are simply significant price levels
* resistance can become support if a price breaks through that level in an uptrend
* vice versa for a downtrend


### Moving averages

* SMA: arithmetic mean of prices over a given time period
* EMA: weighted and give more importance to recent prices

### Relative strength index (RSI)

* plots the relative strength of the price compared to previous prices
* momentum indicator
* above 70: price is relatively expensive (overbought)
* below 30: price is relatively cheap (oversold)
* can't predict how the price will change in the future

### Average true range

* measure of daily price volatility
* tell us the true amount the price could move in a given day
* largest probably move for one day based on previous data
* can be used to set our stop loss and give the trade some breathing room


----


## How to trade with trends

1. Identify the market trends
2. Ask where are the main areas of trade
   - where is support and resistance?
   - any chart pattern?
3. Make your entry based on the daily trade action
   - is the candlestick telling us that the trade will go in the direction of our trade?
   - is the trade bullish or bearish based of candlestick patterns?


### Trading tools:

* [Tradingview](https://www.tradingview.com/)
* [Tokenmetrics](https://tokenmetrics.com/)