Technical analysis for beginners
Technical analysis studies price movement on a chart to assess the likely scenarios for the market. It relies on trends, support and resistance levels, candlestick patterns and mathematical indicators. The method does not predict the future or guarantee results, so it must always be combined with strict risk management. The built-in toolkit of the WOCM platform lets you apply every type of technical analysis directly in the web terminal or mobile app.
What is a trend?
A trend is a sustained direction of price movement. In an uptrend, each successive low and high is higher than the previous one. In a downtrend, they are lower. When the price oscillates in a narrow band with no clear direction, the market is said to be in a range (sideways market).
A common rule says that trading with the trend is safer and simpler than trading against it, but any trend can reverse at any moment. Protective orders on the WOCM server help you lock in profit or limit a loss when the trend suddenly changes.
Market structure
Switch between diagrams: uptrend, downtrend and a break of structure. The labels explain what is happening to the highs and lows.
What are support and resistance levels?
- Support is a price zone below the current market price where declines have most often slowed or stopped because of a concentration of buyers.
- Resistance is a price zone above the current market where rallies have historically stalled under pressure from sellers.
Levels are drawn from past key turning points in the price. The more times the market has bounced off a price zone, the more visible it is to participants. But remember: any level can be broken.
What do candlesticks show?
Each Japanese candlestick on a WOCM chart visualises four key values for the selected period: the open, the close, the high and the low. A long body indicates that one side (bulls or bears) clearly dominated, while long wicks show that the price travelled a long way but came back by the end of the period.
Candlestick patterns (such as an engulfing pattern or a pin bar) are treated as a workable trading signal only together with the overall context: the current trend and strong horizontal levels.
Anatomy of a candlestick
Move the open, close, high and low sliders. The candlestick redraws and the caption explains what it is "saying".
Which indicators are used most often?
| Indicator | What it shows | Typical settings | Limitations |
|---|---|---|---|
| Moving average (MA) | The average price over a period; smooths out market noise | 20, 50, 200 | Lags the price |
| RSI (Relative Strength Index) | Momentum strength, overbought and oversold zones | 14 periods, levels 30 and 70 | Can stay in the extreme zones for a long time in a strong trend |
| MACD | Convergence and divergence of moving averages, momentum strength | 12, 26, 9 | Gives many false signals in a range (sideways market) |
| Bollinger Bands | Current market volatility around a central line | 20 periods, 2 deviations | Touching an outer band does not by itself mean an automatic reversal |
Indicators on one chart
Turn MA, RSI, MACD and Bollinger Bands on and off on a generated chart and change the periods to see for yourself what lag and false signals look like.
How do I combine the tools?
Start by identifying the overall trend on a higher timeframe, find the nearest strong support/resistance levels, wait for a confirming candlestick or indicator signal on your working chart, and calculate the trade size in advance using the WOCM risk calculator. The minimum volume of 0.01 lot on the Standard account type lets you test any combination of indicators with minimal strain on your balance. Do not clutter your screen: two or three tools are usually enough to work effectively.
Quiz: technical analysis
Six questions with explanations.
Frequently asked questions
There is no perfect or "holy grail" indicator. Each performs its own mathematical task, but may lag or give false signals when the market changes phase. The end result depends on clear trading system rules and discipline.
Short timeframes (M1, M5, M15) produce more trades but contain a lot of market noise. Higher timeframes (H4, D1) generate fewer signals, but they are more reliable. Choose a period based on your experience and the time you are prepared to spend in front of the terminal.
Every indicator already on the platform
Open a chart in the WOCM web terminal and try it on demo.
Risk warning. Technical analysis is an analytical tool and does not guarantee profit. Trading CFDs on currency pairs, metals and other assets carries a high level of risk and, at maximum leverage (up to 1:100 on the Gold account type), may result in the loss of your initial deposit.