A reference guide to chart reading, candlestick patterns, RSI, MACD, moving averages, Fibonacci, Dow Theory, volume, and risk management.
Technical analysis (TA) studies market price movements — through charts, patterns, and trading data like price and volume — to forecast future trends. Instead of a company's financial statements, TA studies how buyers and sellers interact in the market, using repeated patterns and signals to time trades.
A useful way to frame the difference: fundamental analysis is tasting the food at each vendor yourself and judging quality directly; technical analysis is watching which vendor draws the biggest crowd and assuming the crowd knows best.
| Basis | Fundamental Analysis (FA) | Technical Analysis (TA) |
|---|---|---|
| Focus | Intrinsic value of the company | Price movement and trends |
| Data used | Financial statements, economy, management | Price charts, volume, indicators |
| Time horizon | Long-term | Short- to medium-term |
| Key question | Is this company worth investing in? | When should I buy or sell? |
| Best for | Investors | Traders |
| Tools | Ratios, earnings, balance sheet | Charts, RSI, MACD, patterns |
| Drawbacks | Slow response, subjective assumptions | False signals, ignores fundamentals |
See the companion Fundamental Analysis guide for the FA side of this comparison.
Line Chart: connects only the closing price of each period into a simple continuous line — good for spotting major trends with minimal noise. Limitation: doesn't show intraday movement, highs/lows, or volatility.
Bar Chart: displays each period's open, high, low, and close (OHLC) as one vertical bar.
Candlestick Chart: the most widely used chart for reading market psychology. Candlestick analysis aims to reveal market sentiment (bullish or bearish), the relative strength of buyers vs. sellers, potential trend reversals or continuation, and ideal entry and exit points.
Your Live Chart already gives you a real candlestick chart with RSI, MACD, moving averages, and Bollinger Bands to apply everything on this page to.
Structure: two lows at similar levels, a neckline formed by the intermediate high, and a final breakout above the neckline.
Market psychology: the first bottom stops panic selling; the bounce shows tentative buyer interest; the second bottom fails to make a new low (weak sellers); breaking above the neckline means buyers have regained control.
Structure: two highs at similar levels, a neckline formed by the intermediate low, and a breakdown that confirms the pattern.
Market psychology: the first top is profit-taking with buyers still active; the pullback shows seller presence; the second top fails as buyers try again and lose; the break below the neckline signals distribution and selling begins.
A powerful bearish reversal pattern: left shoulder → head → right shoulder, showing the shift from strong buyers to strong sellers.
Structure: three peaks (left shoulder, higher head, right shoulder) with a neckline connecting the reaction lows; the final breakdown completes the pattern.
Market psychology: the left shoulder is the first sign of weakness; the head is buyers' last push higher; the right shoulder is a weak rally as buyers lose strength; breaking the neckline starts bearish momentum.
Financial markets generally move through four repeating phases, driven by investor psychology, liquidity flow, and economic conditions.
1. Accumulation Phase: sentiment is pessimistic or neutral; volume is low but slowly rising; price stabilizes in a sideways range while smart money quietly builds positions ahead of renewed optimism.
2–3. Mark-Up & Distribution Phases: after accumulation, the mark-up phase is the broader bull run. In the distribution phase, institutions slowly sell into strength while retail investors stay highly optimistic — price forms a top or broad range, volatility rises without clear direction, and volume spikes near resistance as sentiment turns euphoric.
4. Mark-Down (Declining) Phase: a downtrend begins as supply exceeds demand and selling pressure builds — lower highs and lower lows dominate, with sharp corrections and panic-selling as sentiment shifts to fear.
| Phase | Worldwide Average | NEPSE Average | NEPSE History |
|---|---|---|---|
| Accumulation | 6–18 months | 4–12 months | NEPSE bottoms often form faster due to liquidity scarcity & sudden sentiment shifts |
| Mark-Up | 2–6 years | 1.5–3.5 years | NEPSE bull runs (2003–08, 2012–16, 2019–21) are shorter than global bulls |
| Distribution | 4–12 months | 3–10 months | NEPSE distribution runs longer due to retail-driven, slow topping patterns |
| Mark-Down | 1–4 years | 6–18 months | NEPSE crashes (2008, 2016, 2021 peaks) unfold faster than global bear markets but remain painful |
Support: a price level where buying pressure is strong enough to stop further decline — price tends to bounce upward.
Resistance: a price level where selling pressure prevents further rise — price tends to reverse downward.
| Feature | Real Breakout | Fake Breakout |
|---|---|---|
| Close | Outside S/R | Back inside S/R |
| Volume | High | Low / abnormal |
| Candle | Strong body | Wick-heavy |
| Retest | Successful | Fails immediately |
| Direction | Trend continuation | Sharp reversal |
| Participants | Smart money entry/exit | Retail trapped |
Use the Level tool on Live Chart to mark support/resistance levels directly, and toggle Volume in the Indicators menu to check breakout confirmation.
A trend is the overall direction of price over time. Price can only move in three ways:
A trendline connects higher lows (in an uptrend) or lower highs (in a downtrend), and is one of the most powerful — and most misused — tools in TA.
Use the Trend tool on Live Chart to draw your own trendlines directly on real price data.
An oscillator moves back and forth within a fixed range, showing overbought/oversold zones and whether momentum is strengthening or weakening. Oscillators work best in sideways/ranging markets, to confirm entries/exits, and to detect trend weakness or reversals.
A momentum oscillator (0–100, standard period = 14) that compares average gains vs. average losses: more gains push RSI up, more losses push it down.
| RSI Level | Meaning |
|---|---|
| 70+ | Overbought → possible downside or pullback |
| 50 | Midline → trend confirmation |
| 30 and below | Oversold → possible upside bounce |
Limitations: RSI can stay overbought for weeks in strong uptrends, or oversold for weeks in strong downtrends — it works best in sideways or weak-trend environments.
| Trend RSI (trending market) | Range RSI (range-bound market) |
|---|---|
| RSI stays above 40 in an uptrend, often hitting 70+; below 60 in a downtrend, often hitting 30 or lower. Overbought/oversold signals do NOT work well, and divergence is unreliable. | RSI oscillates between 30 and 70; support & resistance are respected. Overbought (70) usually brings a pullback, oversold (30) usually brings a bounce, and divergence works well. |
Occurs when price and RSI move in opposite directions — price makes a new high/low but RSI fails to match it, revealing hidden buying/selling pressure before the trend actually reverses.
Real RSI(14), computed from real price history, is available on Live Chart — toggle it in the ƒx Indicators menu.
Averages price over a fixed number of periods, with every candle weighted equally: smooth and slow-moving, best for identifying long-term trends and reducing noise for long-term holdings.
Weights recent prices more heavily, so it reacts faster than SMA and captures reversals earlier — preferred by traders for short-term moves.
A trend-following momentum indicator built from two EMAs (12-EMA and 26-EMA) that shows trend direction, momentum strength, and potential reversals.
SMA 5/20/180, EMA 5/20/180, and MACD(12,26,9) are all real, toggleable indicators on Live Chart.
A Break of Structure (BOS) occurs when price breaks and closes beyond a previous swing high or low, confirming continuation of the existing trend — an uptrend BOS breaks the prior swing high (continuation up); a downtrend BOS breaks the prior swing low (continuation down).
MSS (Market Structure Shift) — also called Change of Character (CHoCH) — is the opposite: it breaks structure against the existing trend, usually from a demand/supply zone, and is the first sign of a potential reversal.
A tool that measures pullbacks during a trend, identifying zones where price is likely to bounce, reverse, or continue the trend — these zones are the retracement levels.
How to draw: in an uptrend, draw from the swing low to the swing high; in a downtrend, draw from the swing high to the swing low.
| Level | Meaning | Typical Stop-Loss |
|---|---|---|
| 23.6% | Very shallow pullback — market extremely strong, buyers barely letting price fall; fast, aggressive trend. Entered by very aggressive momentum traders. | Below 38.2% or the most recent swing low |
| 38.2% | Healthy pullback (most common) — trend is stable, a normal correction; swing traders/trend followers enter, institutions add partially. | Below the 50% level or previous swing low |
| 50% | Psychological midpoint (not a true Fibonacci ratio) — market often pauses here; entered by retail and classic technical traders. | Below 61.8% or the swing low |
| 61.8% | The "Golden Zone" — the strongest level; trend almost always resumes from here if genuinely strong. Smart money/institutions accumulate heavily. | Below 78.6% or below structure support |
| 78.6% | Deep retracement — last realistic chance for the trend to hold before a full reversal. Entered by Smart Money Concepts (SMC) / sniper-entry traders (high risk, high reward). | Just below the swing low, kept very tight |
A dividend is a portion of company profit distributed to shareholders. In NEPSE (face value Rs. 100), each action adjusts the share price mechanically on the book-close date.
Adjusted Price = Last Closing Price − Cash Dividend Amount.
Adjusted Price = Last Price ÷ (1 + Bonus%).
| Action | What You Get | Price Impact | EPS Impact | Good/Bad |
|---|---|---|---|---|
| Cash Dividend | Cash | Price ↓ by dividend amount | No change | Good |
| Bonus Shares | Extra shares | Price ↓ proportionally | EPS ↓ | Neutral |
| Right Shares | Right to buy more shares | Price ↓ heavily | Depends | Risky |
Your Calculator already has a bonus/right share TERP adjustment tool built on this exact formula.
Dow Theory is the foundation of all modern technical analysis — trend, support/resistance, breakouts, market structure, even smart-money concepts all trace back to it.
| Scenario | Reading |
|---|---|
| Price ↑ + Volume ↑ | Healthy uptrend — buyers strong, institutions participating |
| Price ↑ + Volume ↓ | Weak uptrend — possible reversal or distribution coming |
| Price ↓ + Volume ↑ | Healthy downtrend — strong sellers, institutions dumping |
| Price ↓ + Volume ↓ | Sellers losing strength — potential trend exhaustion or reversal |
Real Volume (recorded going forward from real trading data) is a toggleable panel on Live Chart.
Before trend analysis, indicators, setups, or breakouts, risk management, position sizing, risk-reward, psychology, journaling, and discipline are the real foundation of profitable trading — the Golden Rule being protect capital. Most traders fail not from a bad strategy but from oversized positions, no stop-loss, emotion-driven trades, revenge trading, or no risk limit.
Risk a maximum of 2% of total capital per trade. This lets you survive 20–40 losing trades in a row without emotional panic or revenge trading.
Ideal RRR is 1:2 or 1:3 — if you risk Rs. 1,000, the reward target should be Rs. 2,000–3,000.
Most losses come from a lack of emotional control, not a lack of knowledge. Fear typically stems from not having a plan, oversized positions, entering late, or watching losses grow — leading to hesitation, premature exits, and missed entries. The fix: position sizing, plan-based trading, a small fixed risk per trade, and journaling to spot fear patterns.
A trading journal records entry, exit, stop-loss, target, RRR, result, market structure, and emotion for every trade — it improves confidence, consistency, discipline, and clarity while exposing repeating mistakes, overtrading, and emotional decisions.
A trading plan should answer: what setups will you trade, when will you enter, where is the stop-loss, what is the RRR, where will you exit, how will you control emotions, what is your daily max loss (2% of capital), and when will you stop trading for the day or week?