What is Technical Analysis?
Technical analysis is an analytical method that attempts to predict future price movements by examining past price movements and trading volumes. Unlike fundamental analysis, it focuses on price charts rather than a company's financial condition.
The basic assumptions of technical analysis are:
- The market discounts everything: All information is reflected in the price
- Prices move in trends: Trends tend to continue
- History repeats itself: Past price patterns can repeat
Chart Types
1. Line Chart
The simplest chart type. Shows only closing prices and helps see the general trend.2. Bar Chart
Shows opening, closing, highest, and lowest prices for each period. Provides more detailed information.3. Candlestick Chart
Also known as Japanese candlesticks. The most popular chart type. Each candle shows:- Body: The difference between opening and closing
- Wick (Shadow): The highest and lowest prices of the period
- Color: Green/white = bullish, Red/black = bearish
Trend Concept
A trend is the movement of prices in a particular direction.
Uptrend
- Higher highs and higher lows
- Buyers in control
- Generally a buying opportunity
Downtrend
- Lower highs and lower lows
- Sellers in control
- Generally time to sell or wait
Sideways Trend
- Horizontal movement within a certain range
- Indecisive market
- Breakout expectation
Support and Resistance
Support Level
The level where the price finds a reaction when falling and buyers step in. When the price reaches this level, it usually turns upward.Resistance Level
The level where the price faces selling pressure when rising and sellers step in. When the price reaches this level, it usually turns downward.Importance of Support and Resistance
- Broken resistance becomes new support
- Broken support becomes new resistance
- Multiple tested levels are stronger
Trend Lines
Uptrend Line
An upward-sloping line connecting at least two low points. Acts as support.Downtrend Line
A downward-sloping line connecting at least two high points. Acts as resistance.Popular Chart Patterns
Continuation Patterns
- Flag: Consolidation after sharp movement
- Pennant: Triangle-shaped narrowing
- Rectangle: Horizontal channel
Reversal Patterns
- Double Top: "M" shaped, bearish signal
- Double Bottom: "W" shaped, bullish signal
- Head and Shoulders: Trend reversal signal
- Inverse Head and Shoulders: Bullish signal
Trading Volume
Volume is the number of shares bought and sold in a given period.
Volume Interpretation
- High volume movements are more reliable
- Increasing volume in trend direction shows continuation
- Extreme volume at peaks may signal reversal
Technical Indicators
Moving Averages
- SMA (Simple): Average of a specific period
- EMA (Exponential): Gives more weight to recent prices
- Usage: Trend identification, support/resistance
RSI (Relative Strength Index)
- Takes values between 0-100
- Above 70: Overbought (may signal sell)
- Below 30: Oversold (may signal buy)
MACD
- Trend following indicator
- Signal line crossovers are important
- Histogram divergences are notable
Technical Analysis Tips
- Don't rely on a single indicator: Use multiple indicators
- Compare timeframes: Analyze in different periods
- Risk management: Use stop-loss orders
- Practice: Practice without risking real money
- Be disciplined: Stick to your plan
Conclusion
Technical analysis is a powerful tool that supports your investment decisions, but it's not perfect. It can be more effective when used together with fundamental analysis. By following the expert analyses provided by Yatırım Radar, you can improve your technical analysis skills.