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The technical analysis essentials with TradingView

Technical analysis is an approach used to assess the likelihood of an asset's price moving in a specific direction and reaching certain levels. Analysts use Supercharts and various tools to visualize and study price and volume data from exchanges.

CONTENTS:

What is technical analysis

Technical analysts presume that by studying the past, we can predict the future, but is this the truth and does it work? Let's dive into what technical analysis is about and how you can use it to navigate price movements.

Technical analysts are also called chartists as charts are the primary visualization technique used with tools this analysis offers.

Chartists use different chart types, look for chart patterns, and set TradingView Alerts to make informed decisions and take timely trades.

The two core components on which technical analysis is based are price and trading volume.

Technical indicators can be built on the relationships between price and volume, various price points, and the rate at which prices change over time, a.k.a. volatility, and much more.

We'll go through the basic components of technical analysis and trading tools chartists use to find the best entry points to "buy the dip" and exit points to "sell the rip."

The main benefit of technical analysis is that it can be used for different forecasting periods and assets. Traders may utilize it for both long-term investment and short-term trading.

A broad range of technical instruments and techniques help traders find their unique trading strategy.

For example, traders may engage in short-term trading on a 5-minute candles chart, or scrutinize monthly line charts for investing — both with different indicators and drawing tools.

However, there are limitations to using some technical tools and instruments, as some assets have not yet evolved enough.

For instance, analyzing Bitcoin on a monthly timeframe would not be as informative as gold with the same inputs.


All humans are prone to false assumptions and relatively unreasonable actions. One of the benefits of technical analysis is that by studying the asset's price action, we can also gain insights into traders' sentiment.

To minimize the probability of such mistakes, there are charting techniques that help you find discrepancies in an asset's prices by analyzing its performance.

One of these is the candles chart, which helps identify prices at which some traders bought an asset, even though from an analytical perspective there was no valid reason to do so.

To gauge market sentiment, chartists look closely at mentions of assets on social media, as technical analysis can incorporate this data to spot shifts in public interest.

Therefore, technical analysis is not only about bold numbers — it's a step forward in evaluating an asset's attractiveness from different angles. However, it works best when used after studying the fundamental metrics.

Technical analysis vs fundamental analysis

Today, there's no major battle between the adherents of technical analysis and fundamental analysis. They coexist, and traders and investors usually use both methods.

The main goal of fundamental analysis is to evaluate whether the current price of an asset is fair and correlates with its intrinsic value. It uses a company’s financial data — such as earnings, dividends, and stock splits — as the main source for its estimations.

With cryptocurrencies, there may be no company (like with Bitcoin) whose reports can be studied. But there are tokenomics and valuation frameworks, both of which study the fundamentals of coins and tokens like circulating supply, dominance by market cap, and fully diluted valuation (FDV).

There may be events like halvings, when miners start receiving half the reward they used to, that influence a coin's price.

Also, there are whitepapers, a cryptocurrency's foundational documents that outline its economic and technical aspects.

As you know already, technical analysis is more precise with shorter time intervals. It is indispensable in helping traders find the entry and exit points for their trades.

But when it comes to estimating a company's vitality and how it will perform under certain real-world conditions, fundamental analysis is the preferred choice.

A common approach is: Fundamentals first / Then technicals.

Key components of technical analysis

Charting is a comprehensive study of tradable assets. To analyze them, traders look at various data and use different instruments.

Price, volume and volatility

These metrics are highly inter-related, with one influencing the others. They comprise the basis of technical analysis.

  • Price: Defined at exchanges, where buyers and sellers trade assets — the price at which they agree is what you see on Supercharts. When you make a trade, your buy or sell price is recorded and then displayed to others to inform their decisions.
  • Volume: The number of assets traded over a specific period. Always measured in units of assets — not in their price (e.g., number of contracts for stocks, number of coins for crypto). Surges in volume are more likely to lead to price changes. Higher deviations in volume are based on increased interest from market participants, which then causes supply or demand shortages or excesses, thereby changing the price.
  • Volatility: The measure of price changes over a period of time. It gives us an understanding of how risky and profitable the asset is. Highly volatile assets can lead to greater gains, but also to much more severe losses than those with lower volatility.

When you learn the basics of price, volume, and volatility, and how they are interconnected, you'll be able to read chart types and technical indicators with ease, making your analysis simpler.

Chart types

The visualization method of displaying price and additional data can be broadly categorized into one of the following category:

  • Classic chart types: Line, bar, and candlestick charts are the most commonly used for their simplicity and comprehensiveness
  • Advanced chart types: Including Session Volume Profile chart and Time Price Opportunity chart, these have built-in indicators that enhance your analysis
  • Intraday chart types: Used for ultra- and short-term trading to benefit from small price changes. Traders utilizing them profit from the number of trades throughout the trading session or from small changes in price with large positions

Technical indicators

TradingView indicators are tools used to assess price and volume changes in order to identify entry and exit points for trades, measure volatility, and estimate the probability of future price changes, trend continuation, or potential trend reversal.

Based on where they are displayed, indicators are commonly classified into:

  • Overlays: Plotted directly on Supercharts
  • Oscillators: Shown in a separate window

Also, they can be grouped by their purpose:

  • Momentum indicators: Provide traders with information about how quickly the price has been moving, measuring the rate of change. These are used to identify the strength of a trend and its potential for continuation
  • Volatility indicators: Track an asset's price fluctuations over time. Used to identify periods of market compression or expansion
  • Volume-based indicators: Confirm price trends by the relationship between price movement and trading volume, as a trend can only be established on the basis of high volume
  • Trend indicators: Filter out market noise by revealing the underlying trend and local support and resistance zones

Based on their origin, we can categorize technical indicators into:

Today, there are countless indicators, so classification can be nearly endless.

Trend, support, and resistance

These are price levels identified by traders as local minimums and maximums for a specific period of time.

  • Trend: The primary direction of price movement, shown by higher highs and lows in an uptrend, lower highs and lows in a downtrend, or a consistent range in a sideways trend. It is confirmed by a repeated pattern of these price movements
  • Support: The local lowest price range that holds the price above a certain point, supporting either sideways or upward movement
  • Resistance: The local highest price range that keeps the price below a certain point, preventing it from rising further or reversing direction

Price patterns

Сhartists believe that repeating chart formations are likely to be followed by specific price movements.

Some patterns can work with different chart types (e.g., Head and Shoulders reversal formation work for both line and candlestick charts).

Some patterns are unique to candlesticks and work only with this chart type. For example, Rising Three Methods — bullish is a 5-candle pattern, which suggests the price is likely to continue its upward movement.

Both of these are one of the primary techniques used by chartists for successful trading.

Chart interval

Chart intervals can be either based on time or price. It is the chart type that defines the basis for the calculation.

Time intervals consider time as their basis to display new chart elements. When a set time passes, new elements appear.

For example, the most common line, bar, and candlestick charts are time-based. No matter how intense or poor trading activity was within a given period, the chart plots new price points/bars/candles with a fixed frequency (e.g., every 15 minutes, 4 hours, 1 day, 1 week, etc.).

Price-based chart types (e.g., Renko, Kagi, or range bars) don't factor in time, but use price as the source to plot their chart figures.

For example, no matter how much time has passed, a new chart element appears only when there's a change in absolute chart values (e.g., an asset's price, financial metric change), chart values in percentage, or ATR indicator's calculation.

With TradingView, you can choose from many default and standard trading intervals (e.g., 15-min, 4-hours, 1-day, etc.) or configure your custom chart intervals.

Drawing tools

These are user-driven instruments used directly on Supercharts to map out key levels of interest, support and resistance zones, price patterns, and more.

Technical analysis is based on visuals. That's why we recommend studying drawing tools, how they differ from one another, and learning how to apply them to identify the best entry and exit points.

Market sentiment

Unlike fundamental analysis, technical analysis aims to understand traders' behavior and psychology.

Market sentiment is the state of market participants' minds that reveals itself in their trading activity. Sentiment can be bullish, bearish, or uncertain — when the market is at the crossroads.

Sentiment is (mostly) intangible. However, there are some instruments and indicators that can help quantify traders' mood:

  • Advance/Decline Line: Shows how many stocks are advancing compared to how many are declining on a daily basis. It reveals whether the "crowd" is truly behind the trend
  • Cumulative Volume Index (CVI): Shows the running total of the difference between the number of advancing and declining stocks. It helps validate trends through volume participation

Regardless of all the indicators and metrics, sometimes what drives the market is traders' beliefs, as the market follows their actions. For example, momentum indicators, including the RSI, may flash an overbought reading for some time, but the market can still keep growing.

Our community ideas can help you understand your peers' mindsets, their interpretation of the market, and their anticipation.

Moreover, you can learn how to use Minds, a live chat while charting, to stay connected to your fellow traders. When you're exploring the markets, you can access, say, minds on the S&P 500, and then continue your research.

If you trade crypto, use the "Sentiment" filter in the Crypto Coins Screener to see what other traders are thinking, quantified.

TradingView technical analysis features

TradingView comes with everything we've covered — and much more. But technical analysis isn't limited to indicators, chart types, patterns, or time intervals. The main TradingView feature for technical analysis is Supercharts. They include hundreds of built-in indicators and drawing tools, and allow you to choose from a wide range of timeframes.

To help you grasp an asset's current state, our symbol pages present an overview of the main technical indicators' readings for each asset across selected time intervals. For example, you can access the Nifty 50 technicals right from its symbol page, just click "Technicals," and choose the desired time interval.

! Note: If you change the data source, technicals will change even if the asset remains the same. Be cautious about relying too heavily on automatic calculations, as they may contradict your trading strategy.

In addition to technicals, comprehensive analysis includes studying the fundamentals of the asset. For that, we offer you tools like the Stock Screener, Economic Calendar, and News Flow.

As mentioned earlier, sentiment moves markets — so you can read what your fellow traders are thinking by exploring the community ideas and using Minds to engage with others on a particular asset.

There’s also Pine Script®, a unique programming language used to write custom indicators and strategies that can be added to your Supercharts and used in technical analysis.

The bottom line

The expected outcome of thorough research is an effective strategy that can benefit you in the long run.

Technical analysis is an extensive area of expertise that requires your attention and willingness to adapt. No strategy is absolute, so be ready to adjust yours.

Failures are unavoidable, so apply risk and money-management techniques — these are essential for surviving real market conditions.

We care about our community and encourage you to be better at trading today than you were yesterday.

Before you start and connect your broker, we suggest you practice with TradingView Paper Trading — a risk-free trading simulator that allows you to develop your own tactics, prove their effectiveness, and only then engage into trading and investment.

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