The easiest technical analysis can be done using the following simple steps:
1. Determine the trend:
- Use Simple Moving Averages (SMA). For example, the 50-day and 200-day SMA will help determine the long-term trend.
- If the 50-day SMA is above the 200-day SMA, it is a bullish (upward) trend. If lower, then there is a bearish (downward) trend.
2. Identify support and resistance levels:
- Support is the level at which the price of an asset usually stops falling and begins to rise.
- Resistance is the level at which the price of an asset usually stops rising and begins to fall.
- Draw horizontal lines on the chart at levels where price has often reversed in the past.
3. Use oscillator indicators:
- Indicators such as the Relative Strength Index (RSI) and Stochastic Oscillator will help determine whether an asset is overbought or oversold.
- RSI values above 70 indicate overbought, below 30 - oversold.
4. Analysis of candlestick patterns:
- Candlestick charts provide a visual representation of price movements and help identify patterns such as doji, hammer, hanging man, etc.
- These patterns can give signals about possible reversals or continuation of the trend.
5. Trading volume (Volume):
- Volume analysis will help confirm the trend. An increase in volume during an uptrend confirms its strength, while a decrease in volume may indicate weakness in the trend.
By following these steps, you can conduct basic technical analysis and gain insight into the future price movement of an asset.
