Technical analysis

What charts and indicators show, and what they never show.

6 articles

The limits of technical analysisIt describes price behaviour and disciplines action. It cannot predict the future, and an honest discussion of it starts there.
Trading volume: the only dimension besides priceHow many securities changed hands. It shows the degree of participation, not the direction.
Overbought indicators: what they actually measureThe speed and size of a recent move, not whether a price is fair. An asset can stay overbought for months.
Moving averages: smoothing rather than a signalThe average price over a period. It shows the direction of a move that already happened and lags it by construction.
Support and resistance: why they sometimes workPrices where movement stalled before. The mechanism is participants' memory rather than a property of the market.
Candlestick charts: what a single candle showsFour numbers for a period — open, high, low, close. Everything else in candlestick analysis is built on top of them.