How to Master Technical Analysis in 7 EASY Steps

Summary

The speaker shares a 7-step guide to master technical analysis for trading. Key steps include: understanding definitions, zooming out to assess larger trends, identifying support/resistance levels, learning supply/demand zones, utilizing basic indicators like RSI and VWAP, taking a 30-day challenge to practice daily and track a few stocks to understand patterns, and taking notes on repeated patterns. The speaker aims to provide an efficient yet comprehensive overview to help traders develop an edge with technical analysis, without overcomplicating things.

Takeaways

• 😀 Technical analysis involves studying past price action to predict future movement
• 👍🏻 Always start by assessing larger timeframes to understand the overall trend
• 🔍 Identify key support, resistance and trendlines on the chart
• 📈 Look for patterns like higher highs/lows to spot uptrends and downtrends
• 🛑 Use indicators like RSI to gauge overbought/oversold conditions
• 📊 Draw supply/demand zones to mark areas of rapid price movement
• ✏️ Take detailed notes on patterns you notice repeating over time
• ⏰ Spend at least 1-2 hours per day practicing chart analysis
• 📝 Only track 2-3 stocks/ETFs daily to understand their personalities
• 🎯 Use technical analysis to gain an edge, not as a crystal ball prediction

Q & A

What are the 7 steps outlined in the video to master technical analysis?

The 7 steps are: 1) Understand the definition and meaning of technical analysis 2) Use the zoom out method to assess larger time frames 3) Identify key market structure and trend 4) Identify support and resistance levels 5) Learn about supply and demand zones 6) Learn basic indicators like RSI and VWAP 7) Take the 30-day challenge to practice daily

Why is it important to start analyzing charts from larger time frames?

It's important to start assessing charts from larger time frames before diving into smaller time frames in order to see the larger trend and perspective that bigger traders and institutions may be looking at. The larger context helps inform trading decisions.

What makes drawing trends and support/resistance levels subjective?

There are no hard set rules on precisely how to draw them. Traders can draw them in slightly different places based on their own interpretations, so it's somewhat subjective. The key is to draw them in places where you think other traders would also identify them.

What can cause supply and demand zones to become weaker over time?

Supply and demand zones can become weaker when price repeatedly tests the boundaries of the zone without a strong reaction. Too many touches tends to erode the potency of the zone.

How might RSI be utilized as part of a trading strategy?

RSI can help identify overbought or oversold conditions to aid entry and exit timing. For example, high RSI levels may signal a pullback is likely soon. RSI divergence can also generate trade signals when price and RSI are disconnected.

What types of patterns would be helpful to document during technical analysis?

Repeated reaction patterns around key support/resistance levels or certain candlestick patterns are good to document. Making note of how price responds to trends or zones over time aids analysis of future occurrences.

What timeframe charts would be best to analyze for day trading versus swing trading?

Smaller timeframe charts like 5-min or 15-min intervals would be best suited for analyzing potential day trading opportunities. Larger timeframes like daily or weekly charts lend better insight into swing trading.

What should be avoided when using technical indicators like VWAP?

Avoid taking trades based solely on indicators like VWAP without considering other factors like price action and structure. Indicators should confirm, not generate trade signals alone.

Why is it helpful to track the same stocks regularly when practicing technical analysis?

Getting repeated exposure builds familiarity with the typical price action personality which aids analysis. You'll get better at spotting subtle pattern shifts.

What timeframe would likely be best to analyze and draw supply/demand zones?

The 20-day 1-hour timeframe tends to work well for drawing fresh supply/demand zones. Going much lower into small timeframes captures less relevant zones.