Technical analysis (TA) studies price action and volume to identify trends and potential future movements in an asset, like gold. Unlike fundamental analysis, TA does not focus on economic or geopolitical factors, but instead relies on historical price data and chart patterns.

Traders who primarily use TA are called technical traders.

---

6.1 What is Technical Analysis?

• Assumes all market information is reflected in price.

• Focuses on rhythm, flow, and trends in price direction.

• Helps identify possible reversals and future price trends.

• Can be subjective: different traders may interpret charts differently.

• Practice and experience improve accuracy.

---

6.2 Candlestick Charts

• Most common chart type for technical analysis.

• Displays Open, High, Low, and Close (OHLC) prices for each period.

• Helps identify:

  • Trend reversals

  • Incoming price trends

  • Market sentiment during the period

• Works well with:

  • Trendlines

  • Support & resistance

  • Moving averages

---

6.3 Trendlines

• Trendlines help visualize price trends: uptrend, downtrend, sideways.

• Can be drawn freely using tops and bottoms of candlesticks.

• Longer trends generally produce more reliable trendlines.

• Helps forecast highs and lows of emerging trends.

---

6.4 Support and Resistance

• Support: Price floor – where price tends to stop falling.

• Resistance: Price ceiling – where price tends to stop rising.

• When broken:

  • Bullish trend → resistance becomes new support

  • Bearish trend → support becomes new resistance

• Crucial for risk management and setting entry/exit points.

---

6.5 Relative Strength Index (RSI)

• Measures overbought/oversold conditions.

• Scale from 0 to 100:

  • <30 → oversold (potential buying opportunity)

  • 70 → overbought (potential selling opportunity)

• Use as a signal to investigate trades, not a sole decision-maker.

---

6.6 Moving Averages (MA)

• Smooths price data, reducing noise.

• Lagging indicator: relies on past prices.

• Common periods: 50-day and 200-day.

• Trading signals:

  • Short-term MA crosses above long-term MA → bullish

  • Short-term MA crosses below long-term MA → bearish

• Types:

  • SMA (Simple Moving Average): arithmetic average over time

  • EMA (Exponential Moving Average): gives more weight to recent prices

---

6.7 Fundamental vs Technical Analysis

• Best approach: Combine both

  • Example: Upcoming US elections may boost gold (fundamental).

  • Use technical indicators to find ideal entry/exit points.

  • Conflicting signals → reassess or hedge risk.

Beginners should learn both to build a strong trading foundation.

---

Module Recap

• Technical analysis studies historical prices and volume to predict trends.

• Key tools:

  • Candlestick charts

  • Trendlines

  • Support & resistance

  • RSI

  • Moving averages (SMA & EMA)

• Trendlines and support/resistance help manage risk.

• RSI helps detect overbought/oversold conditions, not exact trade points.

• Moving averages show trend direction and potential reversals.

• Combining fundamental and technical analysis creates a stronger trading strategy.