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Practical course

How to perform technical analysis

A repeatable process from an empty chart to a contextualised, risk-defined plan.

Weekly → structureDaily → decision

Step 1

Define the asset, horizon and timeframe

Timeframe changes the question. Weekly charts reveal cycles, daily charts refine levels and intraday charts only belong in genuinely short plans.

Use top-down analysis: market, weekly asset, then daily. Prefer logarithmic scale for long periods because equal distances represent equal percentage moves.

Procedure

  1. 1Confirm ticker, venue, currency and adjustments.
  2. 2Write down the intended horizon.
  3. 3Classify the weekly structure.
  4. 4Move to daily without contradicting the higher frame.

Example · Six-month horizon

ABC keeps higher weekly lows above 72 but falls from 86 to 78 daily. It remains a pullback until 72 breaks; evaluate it on daily closes, not intraday noise.

Outcome: clean weekly and daily charts aligned with one horizon.
HHHLHHHL

Step 2

Read structure before indicators

Structure uses meaningful swings, not every candle. Uptrends have higher highs and lows; downtrends have lower highs and lows; overlap signals a range or transition.

A trend line needs two anchors and gains its first real validation on a third touch. A parallel channel estimates movement, never dictates it.

Procedure

  1. 1Hide indicators.
  2. 2Mark the latest three clear swings.
  3. 3Label HH/HL or LH/LL.
  4. 4Mark the level that changes structure.

Example · Structure change

ABC rises 72→84, pulls back to 77 and reaches 91. The uptrend remains intact above 77. A close below 77 ends the bullish sequence but does not automatically establish a downtrend.

Outcome: a written primary trend and the level that changes it.
Resistance 98–100Support 78–80

Step 3

Mark support and resistance as zones

A level is an area where decisions clustered. Build it from bodies, closes, repeated wicks, gaps and volume; higher timeframes carry more weight.

A valid break needs a close outside and subsequent acceptance. An immediate return is a failed break. Role reversal must be observed, not assumed.

Procedure

  1. 1Mark weekly zones first.
  2. 2Keep no more than three active areas.
  3. 3Define the confirming close.
  4. 4Write down invalidation.

Example · 98–100 resistance

After three rejections, ABC closes at 102 on 1.8× average volume, retests 100 quietly and rebounds. Break–retest–continuation is stronger evidence than one wick above 100.

Outcome: two or three relevant zones with confirmation and invalidation.
20-session average

Step 4

Check volume and liquidity

Volume measures participation, not intent. Every trade has a buyer and seller; a bar cannot prove institutional accumulation.

Use relative and dollar volume. A broad break on twice normal volume differs from a thin holiday move. Spread and depth determine executability.

Procedure

  1. 1Calculate a 20-session average.
  2. 2Compare the current bar.
  3. 3Locate the close within its range.
  4. 4Check spread and dollar volume.

Example · Participated breakout

ABC trades 3.2m shares versus a 1.4m average: 2.29 relative volume. It closes in the top 10% of its range with a 0.08% spread—evidence of acceptance, not a guarantee.

Outcome: evidence of participation and an executable setup.
RSI 70RSI 30

Step 5

Add one indicator per question

Indicators transform price or volume and are secondary evidence. Use one per function: moving average for trend, RSI for momentum and ATR for expected range.

RSI above 70 describes strength, not an automatic sell. Divergence needs a structural price break to confirm.

Procedure

  1. 1Ask a question first.
  2. 2Keep parameters stable.
  3. 3Interpret the market regime.
  4. 4Require price confirmation.

Example · RSI is not automatic

ABC reaches 110 with RSI 78 and 116 with RSI 69. The bearish divergence is only confirmed when the latest 106 swing low breaks.

Outcome: one complementary signal with a defined purpose.
Resistance 98–100Support 78–80

Step 6

Build confluence and scenarios

Confluence combines independent evidence: structure, level, volume and momentum. Three close-derived indicators are not three independent proofs.

Build the opposing case first. A sound reading states what is missing and declines a trade when evidence is unclear.

Procedure

  1. 1Score structure and level.
  2. 2Add participation and momentum.
  3. 3Write the opposing case.
  4. 4Require two independent forms of evidence.

Example · Confluent pullback

ABC returns to weekly support at 80 and its latest higher low while RSI reclaims 50 and sell volume fades. A close below 78 invalidates both structure and zone.

Outcome: central and alternative scenarios with independent evidence.
Target 92 · +10 per shareEntry 82Invalidation 78 · −4 per share

Step 7

Define entry, invalidation and size

Professional analysis ends in conditions, not an arrow. Entry activates the thesis, invalidation proves it wrong and target is a plausible area. Position size converts stop distance into portfolio risk.

Reward/risk does not predict win rate. Track expectancy, costs and slippage.

Procedure

  1. 1Set entry and invalidation.
  2. 2Calculate risk per share.
  3. 3Set maximum portfolio loss.
  4. 4Derive size and check liquidity.
  5. 5Write target and management.

Example · Coherent size

Entry 82, invalidation 78 means 4 risk per share. A €20,000 portfolio risking 0.5% allows 25 shares. A 92 target offers 250 potential reward versus 100 risk before costs.

Outcome: a complete plan and a clear reason not to act.

The rule that prevents false confidence

Technical analysis describes probabilities from past prices; it does not know the next move.