Level 2 · Lesson 1 / 15 · English
Introduction to Technical Analysis
3 min reading · Exercises take additional time
0 of 15 lessons completed for this visit
Technical analysis studies how price has behaved through time. Its inputs are usually historical prices, and sometimes volume from a specified venue. A Forex chart does not represent every transaction in the global OTC market. Analysis can organise conditional scenarios; it cannot reveal a certain future or replace a risk budget.
What you will learn
- Record source, quote side and timeframe
- Separate observation from prediction
- Write a falsifiable chart scenario
Illustrative educational chart · Not live market data
Evidence before prediction
Identify the pair, source, quote side and timeframe before interpreting any shape. A sequence of rising closes is evidence about that sample, not a reason the next close must rise. Participants can respond to new information, liquidity can change, and yesterday’s relationship may disappear. Separate a description of the chart from your assumptions about the next move.
Three useful lenses
Trend asks whether successive swings tend to advance, decline or overlap. Location asks whether price is near an area that previously produced a reaction. Momentum asks how rapidly recent prices changed. These lenses answer different questions. A strong move into prior resistance can be described as strong momentum and a difficult location at the same time.
A conditional process
Write a continuation scenario and a failure scenario with observable conditions. Decide what would invalidate the idea, how execution and costs affect it, and whether the potential loss fits a predefined budget. Technical analysis complements contract knowledge and economic context; it is not a shortcut around them. Avoid selecting only the historical examples that support your preferred conclusion.
Key terms
- Technical analysis
- A framework for studying historical price behaviour.
- Scenario
- A conditional account of what may happen if specified conditions hold.
Hypothetical worked example · Not live market prices
Worked chart study · Introduction to Technical Analysis
- Hypothetical closes are 1.1000, 1.1020 and 1.1040. All three rise.
- A continuation scenario requires another higher swing low; a failure scenario allows a close below the previous low.
- Neither scenario assigns a guaranteed probability. Record costs and a loss scenario before considering an order.
| Observation | Illustrative value / meaning |
|---|---|
| Observed | Three rising closes |
| Unknown | Next close |
| Required | Invalidation and risk plan |
Simplified educational calculations. Costs, slippage and provider-specific adjustments apply where relevant; these are not actual returns.
Common mistakes to avoid
- Changing the stated chart rule after seeing the outcome instead of recording a new test.
- Treating a historical description as a guaranteed future result or ignoring execution costs.
- Skipping the timeframe, source or invalidation condition before drawing a conclusion.
Lesson summary
Technical analysis studies how price has behaved through time. Its inputs are usually historical prices, and sometimes volume from a specified venue. A Forex chart does not represent every transaction in the global OTC market. Analysis can organise conditional scenarios; it cannot reveal a certain future or replace a risk budget. Use an explicit rule, consider contrary evidence and practise without risking real money.
Practical exercise
Write two observations and two assumptions about the illustration. Give one condition that would challenge a bullish interpretation.
Knowledge check
Check your understanding
Results apply to this attempt only and are not saved to a student account. No certificate is issued.
Answer all questions correctly and complete the exercise. Progress follows you between Academy pages for this visit only; it is not saved to an account and resets on reload.
Related lessons
Financial education, not personal investment advice. Leveraged Forex and CFDs can lead to substantial losses. Demo practice and correct quiz answers do not guarantee trading success.