Reading a candlestick
Each candle summarises one slice of time — a minute, an hour, a day. It encodes four numbers: where price opened, the high, the low, and where it closed. Green means it closed above its open (buyers won the period); red means it closed below (sellers won). The thin "wick" shows how far price reached before being pushed back.
Market structure: trends, ranges, transitions
Zoom out and price is doing one of three things. Trending — a staircase of higher highs and higher lows (up) or lower highs and lower lows (down). Ranging — bouncing sideways between a floor and a ceiling. Transitioning — breaking from one regime to the other. Most losing trades come from applying trend tactics in a range, or fading a trend that's still intact. Identify the regime first; pick the tactic second.
Support and resistance
If you learn one TA concept, learn this. Support is a price level where buyers have repeatedly stepped in; resistance is where sellers have. They're not magic lines — they're memory. Traders remember where they bought or got trapped, and act again at the same price. The more times a level is tested, the more meaningful it is. Trades taken at a level (buy support, sell resistance) have defined risk; trades taken in the middle of nowhere don't.
Trendlines vs. moving averages
A trendline connects the swing lows of an uptrend (or highs of a downtrend) into a diagonal line of dynamic support. A moving average (e.g. the 50- or 200-period) smooths price into a single line that traders watch as a mean. Both answer "is the trend intact?" Use them as context and confluence, not as standalone buy/sell triggers.
RSI in plain English
RSI measures momentum on a 0–100 scale. Above 70 is conventionally "overbought," below 30 "oversold." But the rookie mistake is treating those as automatic sell/buy signals — in a strong trend, RSI can sit overbought for weeks while price keeps climbing. RSI is most useful for divergence: price makes a new high but RSI doesn't, hinting momentum is fading. Context, not a trigger.
The risk:reward framework
Here's the truth almost no beginner internalises until it's expensive: your entry barely matters. Your exit math is everything. Before you take any trade, you define three prices — entry, stop-loss (where you're wrong and get out), and take-profit (where you bank it). The ratio of the reward distance to the risk distance is your R:R.
At 2:1, you only need to be right ~34% of the time to break even. That's why a disciplined trader with a mediocre hit rate can be profitable, while a "90% win rate" trader with no stops blows up on the one trade that runs against them. The math, not the prediction, is the edge.
Position sizing — the equation that decides who survives
Never risk more than a fixed small percentage of your account on one trade — 1% is a sane default. Your position size falls out of the stop distance: size = (account × risk%) ÷ distance to stop. A wider stop means a smaller position; a tighter stop allows a larger one — but the dollars you can lose stay constant. This single rule is why some traders survive a 10-loss streak and others don't survive three.
Practice exercise
Open a chart of an asset you follow. Find three past setups — a bounce off support, a breakout, a failed move. For each, mark where you'd have entered, where your stop would sit, and a 2R target. Grade them honestly: would the math have paid? You'll quickly feel the difference between "this looks good" and "this is a defensible trade."
Key takeaways
- A candle encodes open/high/low/close. Long wicks = a level tested and rejected.
- Identify the regime (trend / range / transition) before choosing a tactic.
- Support & resistance is memory, not magic — the most useful single TA concept.
- RSI and moving averages are context and confluence, never standalone triggers.
- Exit math beats entry prediction. At 2:1 R:R you can be wrong most of the time and still profit.
- Size from the stop: risk a fixed 1% per trade. This is what lets you survive losing streaks.
