Technical Analysis

What is Technical Analysis?

Understanding the Language of Price Action

Technical Analysis (TA) is a method used by Stock/Future/Options/Forex/Crypto traders and investors to forecast the future price movements of assets—like stocks, crypto, or forex—based on historical market data, primarily price and volume.

Unlike fundamental analysis, which looks at company financials, TA focuses on patterns, trends, and indicators formed on price charts. It’s about reading the psychology of the market through its behavior—because markets may not be logical, but they are predictable.

LotusBee’s Take

At LotusBee, we see TA as a toolkit—not a crystal ball. When used alongside solid macro and micro analysis, TA gives traders an edge in uncertain markets. In today’s fast-moving environment, data-driven, technical insights are no longer optional—they’re essential.

Why Use Technical Analysis?

  1. Market Timing:
    TA helps traders determine when to enter or exit a trade, not just what to trade.
  2. Visual Patterns:
    Charts reflect everything known about a stock—the sum total of all fundamentals, news, and sentiment.
  3. Risk Management:
    Setting stop-loss levels and profit targets based on technical structures helps control losses.
  4. Works Across Markets:
    Whether it’s tech stocks, ETFs, or crypto—TA tools remain relevant and adaptable.

Key Technical KPIs

Here are the most common indicators and tools in every TA toolkit:

1. Moving Averages (MA):

  • Simple Moving Average (SMA) and Exponential Moving Average (EMA) help identify trends and reversals.
  • Common settings: 20-day, 50-day, and 200-day.

2. Relative Strength Index (RSI):

  • A momentum oscillator ranging from 0–100.
  • RSI > 70 = Overbought; RSI < 30 = Oversold.

3. MACD (Moving Average Convergence Divergence):

  • Combines moving averages to reveal changes in momentum.
  • Look for crossovers between the MACD line and signal line for entry/exit cues.

4. Volume:

  • Confirms the strength of a price move.
  • Rising volume = conviction; declining volume = lack of interest.

5. Support and Resistance:

  • Key price levels where assets tend to pause or reverse.
  • Knowing these can give you a roadmap of where price might react.

6. Fibonacci Retracement Levels:

  • Used to identify potential reversal levels within a trend.
  • Common ratios: 38.2%, 50%, 61.8%.