02 | Reading Charts | AI Final Submission

02 Reading the Charts

Technical Analysis

While the stock and crypto market differ in some aspects, a commonality all tradable assets share is reading charts. What you learn here can be applied universally. Technical analysis is a way to study price charts and trading patterns to predict future market movements. Instead of looking at a company or asset's fundamentals, it focuses on trends, patterns, and indicators to find trading opportunities.

Chart Basics:

Candlestick Charts are the most popular choice for technical analysis, candlesticks show the opening, closing, high, and low prices for a specific time frame.

Candlestick Anatomy:
- Body: Represents the difference between the opening and closing prices.
- Wicks (Shadows): Extend from the body, showing the highest and lowest prices reached.
- Color: Green (or white) indicates upward movement, while red (or black) indicates downward movement.

Key Chart Elements to Analyze

Time Frames:
Choose a time frame based on your trading goals. For example:
- Day traders often use 1-minute, 5-minute, or hourly charts.
- Swing traders focus on daily or weekly charts.
- Long-term investors use monthly charts to spot big-picture trends.
Price Trends:
- Uptrend: Higher highs and higher lows.
- Downtrend: Lower highs and lower lows.
- Sideways (Range-Bound): Prices oscillate between a support and resistance level.
Support and Resistance Levels:
- Support: A price level where demand increases, preventing the price from falling further.
- Resistance: A price level where selling pressure intensifies, preventing the price from rising further.
- These levels are critical for identifying potential reversal points or breakout opportunities.
Volume:
- Measures how much of the asset is being traded during a specific period.
- High volume during price movements often validates the strength of a trend.
- Low volume during a price move may indicate a lack of conviction or the potential for a reversal.

Bearish Trend

Neutral Trend

Bullish Trend

Resistance Level

Support Level

Technical Indicators
Indicators provide additional context to raw price data. You should never make a trade purely based off what the indicator is displaying. Some of the most commonly used include:

Moving Averages (MA):
- Smooths out price data to identify trends.
- Types include Simple Moving Average (SMA) and Exponential Moving Average (EMA).
- Crossovers between short-term and long-term MAs often signal potential trend reversals.
Relative Strength Index (RSI):
- Measures the momentum of price movements.
- Values range from 0 to 100, with overbought conditions typically above 70 and oversold conditions below 30.
MACD (Moving Average Convergence Divergence):
- Shows the relationship between two moving averages.
- Crossovers between the MACD line and the
  signal line can indicate buy or sell signals.
Bollinger Bands:
- Consist of a moving average with two standard deviation lines.
- Price movement outside the bands may indicate extreme market conditions or potential reversals.

02 Reading the Charts

Technical Analysis

Key Chart Elements to Analyze

Time Frames:Choose a time frame based on your trading goals. For example:

Day traders often use 1-minute, 5-minute, or hourly charts.

Swing traders focus on daily or weekly charts.

Long-term investors use monthly charts to spot big-picture trends.

Price Trends:

Uptrend: Higher highs and higher lows.

Downtrend: Lower highs and lower lows.

Sideways (Range-Bound): Prices oscillate between a support and resistance level.

Support and Resistance Levels:

Support: A price level where demand increases, preventing the price from falling further.

Resistance: A price level where selling pressure intensifies, preventing the price from rising further.

These levels are critical for identifying potential reversal points or breakout opportunities.

Volume:

Measures how much of the asset is being traded during a specific period.

High volume during price movements often validates the strength of a trend.

Low volume during a price move may indicate a lack of conviction or the potential for a reversal.

Technical Indicators Indicators provide additional context to raw price data. You should never make a trade purely based off what the indicator is displaying. Some of the most commonly used include:

Moving Averages (MA):

Smooths out price data to identify trends.

Types include Simple Moving Average (SMA) and Exponential Moving Average (EMA).

Crossovers between short-term and long-term MAs often signal potential trend reversals.

Relative Strength Index (RSI):

Measures the momentum of price movements.

Values range from 0 to 100, with overbought conditions typically above 70 and oversold conditions below 30.

MACD (Moving Average Convergence Divergence):

Shows the relationship between two moving averages.

Crossovers between the MACD line and the signal line can indicate buy or sell signals.

Bollinger Bands:

Consist of a moving average with two standard deviation lines.

Price movement outside the bands may indicate extreme market conditions or potential reversals.

Time Frames:
Choose a time frame based on your trading goals. For example:

Technical Indicators
Indicators provide additional context to raw price data. You should never make a trade purely based off what the indicator is displaying. Some of the most commonly used include:

Crossovers between the MACD line and the
signal line can indicate buy or sell signals.