📈 Technical Analysis Mastery Skill

Master the art and science of chart reading

Foundation: Price, Volume, Trend, Support/Resistance

Tools: Patterns | Indicators | Fibonacci | Volume

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📚 Table of Contents

1. Technical Analysis Fundamentals
2. Chart Pattern Recognition
3. Trend Analysis
4. Support & Resistance Mastery
5. Indicator Integration
6. Volume Analysis
7. Fibonacci Tools
8. Elliott Wave Basics
9. Multi-Timeframe Confluence
10. Integration Strategies

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1. Technical Analysis Fundamentals {#fundamentals}

🎯 Core Principles

Dow Theory (Foundation):

1. The market discounts everything
   → All known information is in price

2. Price moves in trends
   → Uptrend, Downtrend, Sideways

3. Trends have three phases
   → Accumulation → Public Participation → Distribution

4. Averages must confirm
   → Multiple indicators/timeframes align

5. Volume confirms trend
   → Strong moves = high volume

6. Trends persist until reversal
   → Don't fight the trend

Types of Analysis:

Technical Analysis (TA):
✅ Price, volume, patterns
✅ Short to medium term
✅ Works on all markets

Fundamental Analysis (FA):
✅ Financial statements, economics
✅ Long term
✅ Stocks, commodities

Sentiment Analysis:
✅ Market psychology
✅ Contrarian indicators
✅ Positioning data

✅ Best Approach: Combine all three!

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2. Chart Pattern Recognition {#chart-patterns}

See price-action-trading-skill for detailed patterns

🎯 Quick Reference

Reversal Patterns:

Head & Shoulders: ⭐⭐⭐⭐⭐ (80% success rate)
Double Top/Bottom: ⭐⭐⭐⭐ (70% success)
Triple Top/Bottom: ⭐⭐⭐ (75% success)

✅ Best at major S/R levels
✅ Higher timeframe = more reliable

Continuation Patterns:

Flags/Pennants: ⭐⭐⭐⭐⭐ (Quick, reliable)
Triangles: ⭐⭐⭐⭐ (Ascending, Descending, Symmetrical)
Rectangles: ⭐⭐⭐ (Consolidation boxes)
Wedges: ⭐⭐⭐ (Rising bearish, Falling bullish)

✅ Trade breakout direction
✅ Measure pattern height = target

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3. Trend Analysis {#trend-analysis}

🎯 Identifying Trends

Trend Definition:

Uptrend:
- Higher Highs (HH)
- Higher Lows (HL)
- Price > Moving Averages

Downtrend:
- Lower Highs (LH)
- Lower Lows (LL)
- Price < Moving Averages

Sideways:
- Equal highs
- Equal lows
- Price chops around MAs

Trend Strength Measurement:

1. ADX (Average Directional Index) ⭐⭐⭐⭐⭐

ADX Values:
< 20: Weak/No trend (ranging)
20-25: Trend developing
25-50: Strong trend ✅
50-75: Very strong trend
> 75: Extremely strong (rare)

Components:
- ADX: Trend strength (no direction)
- +DI: Bullish pressure
- -DI: Bearish pressure

Trading Rules:
✅ Only trade trends when ADX > 25
✅ +DI > -DI = Uptrend
✅ -DI > +DI = Downtrend
❌ Avoid trading when ADX < 20 (choppy)

2. Moving Averages

Key MAs:
- 20 EMA: Short-term trend
- 50 EMA: Medium-term trend
- 200 EMA: Long-term trend (MOST IMPORTANT)

Trend Rules:
✅ Price > 200 EMA = Bull market
✅ Price < 200 EMA = Bear market
✅ 50 EMA > 200 EMA = Golden Cross (bullish)
✅ 50 EMA < 200 EMA = Death Cross (bearish)

Support/Resistance:
- In uptrend: 20/50 EMA = support
- In downtrend: 20/50 EMA = resistance

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4. Support & Resistance Mastery {#support-resistance}

🎯 Types of S/R

1. Horizontal S/R ⭐⭐⭐⭐⭐

Identification:
✅ Price bounces multiple times (2+ touches)
✅ Round numbers (100.00, 1.5000, $50)
✅ Previous swing highs/lows
✅ All-time high/low (ATH/ATL)

Strength Factors:
- More touches = stronger
- Longer timeframe = stronger
- Recent tests = more relevant
- Round numbers = psychological importance

Role Reversal:
Support breaks → becomes resistance
Resistance breaks → becomes support

2. Dynamic S/R (Moving Averages)

In Uptrend:
- 20 EMA: First support
- 50 EMA: Second support
- 200 EMA: Major support

In Downtrend:
- 20 EMA: First resistance
- 50 EMA: Second resistance
- 200 EMA: Major resistance

✅ Use for trailing stops
✅ Use for entry zones

3. Fibonacci Retracements (Detailed in Section 7)

Key Levels:
- 38.2%: Shallow retracement
- 50.0%: Psychological level
- 61.8%: Golden ratio (MOST IMPORTANT)

✅ High probability bounce zones
✅ Combine with horizontal S/R for confluence

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5. Indicator Integration {#indicators}

🎯 Indicator Categories

Trend Indicators:

1. Moving Averages (SMA, EMA, WMA)
2. MACD
3. Parabolic SAR
4. ADX
5. Ichimoku Cloud

Use: Identify trend direction

Momentum Oscillators:

1. RSI (Relative Strength Index)
2. Stochastic
3. CCI (Commodity Channel Index)
4. Williams %R
5. Momentum Indicator

Use: Overbought/oversold conditions

Volatility Indicators:

1. ATR (Average True Range)
2. Bollinger Bands
3. Keltner Channels
4. Donchian Channels

Use: Stop loss placement, breakout detection

Volume Indicators:

1. Volume
2. OBV (On-Balance Volume)
3. VWAP
4. Volume Profile
5. MFI (Money Flow Index)

Use: Confirm price moves

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🎯 Top 5 Indicators Deep Dive

1. RSI (Relative Strength Index) ⭐⭐⭐⭐⭐

Formula: RSI = 100 - [100 / (1 + RS)]
where RS = Average Gain / Average Loss

Default Period: 14

Levels:
> 70: Overbought (potential reversal down)
< 30: Oversold (potential reversal up)

Advanced Usage:
1. Divergence:
   - Bullish: Price lower low, RSI higher low
   - Bearish: Price higher high, RSI lower high

2. Trend Confirmation:
   - Uptrend: RSI stays 40-90 (rarely goes < 40)
   - Downtrend: RSI stays 10-60 (rarely goes > 60)

3. Centerline Crossover:
   - RSI > 50: Bullish momentum
   - RSI < 50: Bearish momentum

✅ Best Use: Divergence detection
✅ Combine with: Support/Resistance

2. MACD (Moving Average Convergence Divergence) ⭐⭐⭐⭐⭐

Components:
- MACD Line: 12 EMA - 26 EMA
- Signal Line: 9 EMA of MACD
- Histogram: MACD - Signal

Signals:
1. Crossover:
   - MACD crosses above Signal = Buy
   - MACD crosses below Signal = Sell

2. Zero Line:
   - MACD > 0: Bullish momentum
   - MACD < 0: Bearish momentum

3. Divergence:
   - Price vs MACD divergence = reversal

4. Histogram:
   - Growing histogram = increasing momentum
   - Shrinking histogram = weakening momentum

✅ Best Use: Trend following
✅ Combine with: Trend confirmation (ADX)

3. Bollinger Bands ⭐⭐⭐⭐⭐

Components:
- Middle Band: 20 SMA
- Upper Band: Middle + (2 × Standard Deviation)
- Lower Band: Middle - (2 × Standard Deviation)

Interpretation:
1. Squeeze:
   - Bands narrow = Low volatility
   - Precedes breakout
   - Enter breakout direction

2. Band Touch:
   - Price at upper band = Overbought
   - Price at lower band = Oversold
   - Mean reversion opportunity

3. Band Walk:
   - Price rides upper band = Strong uptrend
   - Price rides lower band = Strong downtrend
   - Don't fade the trend!

4. Bollinger Bounce:
   - In range: Buy at lower, sell at upper

✅ Best Use: Volatility + Mean reversion
✅ Combine with: RSI for confirmation

4. Stochastic Oscillator ⭐⭐⭐⭐

Formula: %K = 100 × [(Close - Low14) / (High14 - Low14)]
%D = 3-period SMA of %K

Range: 0-100

Levels:
> 80: Overbought
< 20: Oversold

Signals:
1. Overbought/Oversold:
   - > 80 + turn down = Sell
   - < 20 + turn up = Buy

2. %K crosses %D:
   - %K crosses above %D = Buy
   - %K crosses below %D = Sell

3. Divergence:
   - Price vs Stochastic divergence = reversal

✅ Best Use: Range-bound markets
✅ Combine with: Support/Resistance levels

5. ATR (Average True Range) ⭐⭐⭐⭐⭐

Formula: Average of True Range over N periods
True Range = Max of:
1. High - Low
2. |High - Previous Close|
3. |Low - Previous Close|

Use Cases:
1. Stop Loss Placement:
   SL = Entry ± (ATR × 2)

2. Position Sizing:
   Size = Risk Amount / (ATR × 2)

3. Volatility Filter:
   - High ATR = High volatility → Wider stops
   - Low ATR = Low volatility → Tighter stops

4. Breakout Confirmation:
   - ATR increases = Real breakout
   - ATR flat = False breakout

⚠️ ATR shows volatility, NOT direction!

✅ Best Use: Risk management
✅ Essential for: Every strategy

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6. Volume Analysis {#volume-analysis}

🎯 Volume Principles

Volume Confirmation:

✅ Uptrend + Increasing Volume = Strong
✅ Uptrend + Decreasing Volume = Weakening
✅ Downtrend + Increasing Volume = Strong
✅ Downtrend + Decreasing Volume = Weakening

Breakout + High Volume = Valid
Breakout + Low Volume = Likely false

VWAP (Volume Weighted Average Price):

Calculation: Cumulative (Price × Volume) / Cumulative Volume

Use:
- Institutional benchmark
- Intraday support/resistance
- Price above VWAP = Bullish
- Price below VWAP = Bearish

Day Trading:
✅ Buy when price dips to VWAP in uptrend
✅ Sell when price bounces to VWAP in downtrend

Volume Profile:

Shows volume distribution at different price levels

Key Concepts:
- POC (Point of Control): Highest volume level
- Value Area: 70% of volume occurred here
- HVN (High Volume Node): Support/Resistance
- LVN (Low Volume Node): Weak areas (fast moves)

Trading:
✅ POC acts as magnet (mean reversion)
✅ LVN = fast moves through these zones
✅ HVN = strong S/R levels

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7. Fibonacci Tools {#fibonacci}

🎯 Fibonacci Retracements ⭐⭐⭐⭐⭐

How to Draw:

Uptrend:
1. Identify swing low (start)
2. Identify swing high (end)
3. Draw Fib from low to high

Downtrend:
1. Identify swing high (start)
2. Identify swing low (end)
3. Draw Fib from high to low

Key Levels:

23.6%: Minor retracement (weak)
38.2%: Shallow retracement ⭐⭐⭐
50.0%: Psychological level ⭐⭐⭐⭐
61.8%: Golden Ratio ⭐⭐⭐⭐⭐ (MOST IMPORTANT)
78.6%: Deep retracement ⭐⭐

Trading Strategy:
1. Identify strong trend
2. Wait for pullback
3. Look for bounce at Fib levels
4. Enter at 61.8% (best risk/reward)
5. Stop below 78.6%

Fibonacci Extensions:

Use for profit targets beyond swing high/low

Key Extension Levels:
127.2%: First target
161.8%: Golden extension (MOST USED) ⭐⭐⭐⭐⭐
200%: Psychological level
261.8%: Extended target

✅ Used for take profit placement
✅ Combines with structure analysis

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8. Elliott Wave Basics {#elliott-wave}

🎯 Wave Theory Fundamentals

Wave Structure:

Impulse Waves (Trend):
1 → 2 → 3 → 4 → 5
- Wave 1, 3, 5: Move with trend
- Wave 2, 4: Counter-trend corrections
- Wave 3: Usually longest and strongest

Correction Waves:
A → B → C
- Moves against main trend
- After Wave 5 completes

Rules:

✅ Wave 2 never retraces more than 100% of Wave 1
✅ Wave 3 never shortest (usually longest)
✅ Wave 4 never overlaps Wave 1

Fibonacci Relationships:
- Wave 2: 50-61.8% of Wave 1
- Wave 3: 161.8% of Wave 1
- Wave 4: 38.2% of Wave 3
- Wave 5: 100% of Wave 1 (often = Wave 1 length)

Practical Use:

✅ Identify wave 3 (strongest move)
✅ Trade with the impulse waves
✅ Stay out during corrections (A-B-C)
❌ Don't force wave counts
❌ High subjectivity (use as context only)

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9. Multi-Timeframe Confluence {#multi-timeframe}

🎯 Top-Down Analysis ⭐⭐⭐⭐⭐

Three-Timeframe System:

Example (Day Trading):
1. Daily (D1): Direction
2. 4-Hour (H4): Structure
3. 15-Min (M15): Entry

Process:
Step 1 (Daily): What's the trend?
- Uptrend → Look for BUYS only
- Downtrend → Look for SELLS only
- Range → Trade both

Step 2 (H4): Where are the zones?
- S/R levels
- Demand/Supply zones
- Fibonacci retracements

Step 3 (M15): When to enter?
- Wait for price to reach H4 zone
- Look for entry pattern
- Enter with confirmation

✅ All timeframes aligned = Highest probability!

Confluence Checklist:

Maximum Confluence Trade:
✅ Higher TF trend aligned
✅ Price at major S/R level
✅ Fibonacci 61.8% retracement
✅ Price action pattern (engulfing)
✅ RSI divergence
✅ Volume confirmation
✅ Round number (1.2000, $100)

3+ factors = Good trade
5+ factors = Excellent trade
7 factors = Dream setup!

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10. Integration Strategies {#integration}

🎯 Complete TA Strategy Template

Strategy: Trend + Retracement + Confluence

# STEP 1: Identify Trend (Daily)
def check_trend(df_daily):
    """
    Check if price is in uptrend or downtrend

    Returns: 'uptrend', 'downtrend', or 'sideways'
    """
    # Price vs 200 EMA
    current_price = df_daily['close'].iloc[-1]
    ema_200 = df_daily['close'].ewm(span=200).mean().iloc[-1]

    # ADX for trend strength
    adx = calculate_adx(df_daily)

    if adx < 25:
        return 'sideways'  # No clear trend
    elif current_price > ema_200:
        return 'uptrend'
    else:
        return 'downtrend'


# STEP 2: Find Entry Zone (H4)
def find_entry_zones(df_h4, trend):
    """
    Identify potential entry zones using Fibonacci

    Returns: List of price levels
    """
    # Find recent swing high/low
    swing_high = df_h4['high'].rolling(20).max().iloc[-20:].max()
    swing_low = df_h4['low'].rolling(20).min().iloc[-20:].min()

    # Calculate Fibonacci levels
    diff = swing_high - swing_low

    if trend == 'uptrend':
        # Retracement levels for pullback in uptrend
        fib_382 = swing_high - (diff * 0.382)
        fib_500 = swing_high - (diff * 0.500)
        fib_618 = swing_high - (diff * 0.618)

        return [fib_618, fib_500, fib_382]  # 618 is best

    elif trend == 'downtrend':
        # Retracement levels for bounce in downtrend
        fib_382 = swing_low + (diff * 0.382)
        fib_500 = swing_low + (diff * 0.500)
        fib_618 = swing_low + (diff * 0.618)

        return [fib_618, fib_500, fib_382]

    return []


# STEP 3: Entry Confirmation (M15)
def check_entry_signal(df_m15, entry_zone, trend):
    """
    Check if price has reached entry zone with confirmation

    Returns: True if entry signal, False otherwise
    """
    current_price = df_m15['close'].iloc[-1]
    prev_price = df_m15['close'].iloc[-2]
    rsi = calculate_rsi(df_m15)

    # Check if price in entry zone (within 10 pips)
    in_zone = any(abs(current_price - zone) < 0.0010 for zone in entry_zone)

    if not in_zone:
        return False

    # Confirmation criteria
    if trend == 'uptrend':
        # Bullish confirmation
        bullish_candle = df_m15['close'].iloc[-1] > df_m15['open'].iloc[-1]
        rsi_oversold = rsi < 40
        return bullish_candle and rsi_oversold

    elif trend == 'downtrend':
        # Bearish confirmation
        bearish_candle = df_m15['close'].iloc[-1] < df_m15['open'].iloc[-1]
        rsi_overbought = rsi > 60
        return bearish_candle and rsi_overbought

    return False


# STEP 4: Risk Management
def calculate_entry_params(entry_price, trend, atr):
    """
    Calculate stop loss and take profit

    Returns: (stop_loss, take_profit_1, take_profit_2)
    """
    if trend == 'uptrend':
        stop_loss = entry_price - (2 * atr)
        take_profit_1 = entry_price + (2 * atr)  # 2R
        take_profit_2 = entry_price + (4 * atr)  # 4R
    else:  # downtrend
        stop_loss = entry_price + (2 * atr)
        take_profit_1 = entry_price - (2 * atr)  # 2R
        take_profit_2 = entry_price - (4 * atr)  # 4R

    return stop_loss, take_profit_1, take_profit_2


# MAIN STRATEGY
def run_strategy(df_daily, df_h4, df_m15):
    """
    Complete multi-timeframe strategy
    """
    # Step 1: Check trend
    trend = check_trend(df_daily)

    if trend == 'sideways':
        print("No clear trend. Wait for trending market.")
        return None

    print(f"Trend: {trend}")

    # Step 2: Find entry zones
    entry_zones = find_entry_zones(df_h4, trend)
    print(f"Entry zones: {entry_zones}")

    # Step 3: Check for entry signal
    if check_entry_signal(df_m15, entry_zones, trend):
        entry_price = df_m15['close'].iloc[-1]
        atr = calculate_atr(df_m15)

        # Step 4: Calculate risk parameters
        sl, tp1, tp2 = calculate_entry_params(entry_price, trend, atr)

        print(f"ENTRY SIGNAL!")
        print(f"Entry: {entry_price}")
        print(f"Stop Loss: {sl}")
        print(f"TP1 (2R): {tp1}")
        print(f"TP2 (4R): {tp2}")

        return {
            'trend': trend,
            'entry': entry_price,
            'stop_loss': sl,
            'take_profit_1': tp1,
            'take_profit_2': tp2
        }

    print("No entry signal yet. Wait for price to reach zone.")
    return None

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📊 Technical Analysis Cheat Sheet

Trend Identification:

✅ Price vs 200 EMA
✅ ADX > 25
✅ Higher highs + higher lows (or opposite)

Entry Timing:

✅ Fibonacci 61.8% retracement
✅ Support/Resistance test
✅ RSI oversold/overbought (depending on strategy)
✅ MACD crossover confirmation
✅ Volume confirmation

Risk Management:

✅ Stop Loss: Below structure or 2× ATR
✅ Take Profit: 2R minimum
✅ Position Size: 2% risk max

Confluence Factors:

More factors = Higher probability

7+ factors: Dream setup
5-6 factors: Excellent
3-4 factors: Good
1-2 factors: Skip

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🎯 Learning Path

Month 1-2: Foundation

✅ Learn candlesticks
✅ Identify S/R
✅ Understand trends (HH/HL, LH/LL)
✅ Master 1-2 indicators (RSI + MACD)

Month 3-4: Intermediate

✅ Chart patterns
✅ Fibonacci retracements
✅ Multi-timeframe analysis
✅ Volume analysis basics

Month 5-6: Advanced

✅ Confluence trading
✅ Divergence detection
✅ Volume profile
✅ Wave analysis (optional)

Month 7-12: Mastery

✅ Develop personal strategy
✅ Backtest thoroughly
✅ Paper trade 3 months
✅ Live trading (small size)

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⚠️ Common Mistakes

❌ Don't:

• Use too many indicators (3-5 max)
• Ignore higher timeframe
• Trade without stop loss
• Chase breakouts
• Trade against trend
• Rely on single indicator

✅ Do:

• Keep charts clean
• Top-down analysis
• Risk management first
• Wait for confluence
• Trade with trend
• Combine multiple factors

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Master technical analysis and read the market like a book! 📈

"The secret to making money in the market is not to be right all the time, but to lose the least amount possible when you're wrong."