TradersTechnical Analysis 101: Charts, Trends, and Levels
Master the fundamentals of technical analysis. Learn how to read charts, identify trends, draw support and resistance levels, and use them to make trading decisions.
Written By
Karolina Hansen
Key Takeaways
- Candlestick charts show open, high, low, and close in one view, which is why most traders prefer them over line charts.
- A trend is defined by structure — higher highs and higher lows for an uptrend, the reverse for a downtrend — not by a single moving average.
- Support and resistance form where price has previously reacted, and the more times a level is tested, the more traders are watching it.
- No single tool works in isolation — trends, levels, and confirmation are meant to be read together, not one at a time.
Chart Types and Timeframes
Technical analysis is the study of past price movement to inform a view on where price might go next, on the assumption that historical patterns and behaviour tend to repeat at least loosely over time. It's distinct from fundamental analysis, which looks at the underlying economic or company data instead of the price chart itself.
| Chart Type | What It Shows | Best For |
|---|---|---|
| Line chart | A single line connecting closing prices | A quick, uncluttered view of the overall direction |
| Bar chart | Open, high, low, and close as a single vertical bar with ticks | Traders who prefer a less visually dense OHLC view |
| Candlestick chart | Open, high, low, and close as a coloured body with wicks | The most widely used format — quick visual read of buying vs. selling pressure |
Identifying Trends
A trend describes the general direction price is moving over a given period, defined by its structure rather than by any single indicator. An uptrend is a sequence of higher highs and higher lows; a downtrend is the reverse — lower highs and lower lows. When price stops making either, it's often described as ranging or consolidating.
Uptrend
Higher highs and higher lows in sequence
Downtrend
Lower highs and lower lows in sequence
Range
Price oscillating between a fairly consistent high and low, without a clear directional structure
Support and Resistance
Support is a price zone below the current price where buying pressure has previously been strong enough to halt or reverse a decline; resistance is the equivalent zone above current price where selling pressure has previously done the same. They typically form around prior swing highs and lows, round numbers, and levels a large number of other traders are visibly watching.
- Treat these as zones, not exact prices — reversals rarely happen at the precise number to the pip or cent.
- A level that's been tested multiple times and held is often considered more significant, though nothing holds indefinitely.
- Once broken, a resistance level can become support, and a support level can become resistance, as the traders positioned around it change their frame of reference.
Drawing Trendlines
A trendline connects a series of swing highs (for a downtrend) or swing lows (for an uptrend) to visualise the trend's slope and give a rough sense of where price might find support or resistance next. The more times a trendline is touched and respected without being broken, the more traders tend to watch it — but a trendline breaking doesn't automatically mean the trend has reversed; it's one signal among several worth weighing together.
Putting It All Together
None of these tools work especially well in isolation. A useful technical read usually combines the broader trend, a specific level the price is reacting to, and some form of confirmation — a candle formation, a volume signal, or simply price actually respecting the level rather than cutting straight through it.
Establish the Trend
Higher timeframe structure first — trading against it requires a stronger reason
Mark the Levels
Support, resistance, and any trendlines worth watching
Wait for the Reaction
Let price actually arrive at the level rather than anticipating it
Look for Confirmation
A specific, repeatable signal — not just proximity to a line
Frequently Asked Questions
Neither is inherently more reliable — many traders combine both. Technical analysis focuses on price behaviour and structure; fundamental analysis focuses on the underlying economic or company data driving longer-term value.
There's no fixed number — adding indicators has diminishing (and sometimes negative) returns once they start conflicting or simply repeating information the price chart already shows. Many traders find a small, well-understood set works better than a crowded chart.
They describe tendencies observed across many historical instances, not guarantees for any single trade. Combining a pattern with the broader trend and a defined risk plan tends to matter more than the pattern alone.
Educational content only — not financial advice. Trading involves risk, and past chart behaviour does not guarantee future results.
Continue learning
Understanding Price Action TradingMaster the fundamentals of price action trading - learn to read the market without indicators and make decisions based on what price is actually doing.Also worth reading: Master Risk Management: The Foundation of Profitable Trading · What is Liquidity in Trading?
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