Technical Analysis and Price Action: Part 1
- Aug 3
- 3 min read
Reading Charts, Key Levels and Market Structure
Technical analysis studies how price behaves on a chart. Instead of treating every movement as random, traders use historical price data to identify trends, recurring reaction areas and changes in market structure.
This first lesson builds the foundation: chart types, OHLC data, support and resistance, and trend lines.
Part 1: Technical Analysis • Price Action • Chart Types • OHLC • Support & Resistance • Trend Lines
1. Technical Analysis and Price Action
Technical analysis provides a framework for studying price movement.
Price action is the most direct version of that approach: it focuses primarily on the market’s own price history rather than relying on additional price-derived indicators.
The aim is not to predict every future move. A more practical goal is to understand the current market condition: whether price is trending, consolidating, reacting to a key level or beginning to change character.
2. The Three Main Price Charts
The source lesson introduces three common chart formats: line charts, bar charts and candlestick charts. Each represents the same market from a different level of detail.
Line Chart
A line chart usually connects one closing price to the next. It is simple and useful for seeing the broad direction of a market, but it hides what happened inside each period because the open, high and low are not displayed.
Bar Chart
A bar chart adds more information. The vertical line represents the period’s full high-to-low range, while small horizontal marks identify the opening and closing prices.
Candlestick Chart
Candlesticks display the same OHLC information as bars, but the open-to-close range is shown as a body. The wicks extend to the high and low.
This makes it easier to see whether buyers or sellers dominated a period and how strongly price was rejected from an extreme.
3. Open, High, Low and Close (OHLC)
Every bar or candlestick summarises a selected period using four prices: the first traded price, the highest price reached, the lowest price reached and the final traded price.
The meaning of a candle therefore depends on the timeframe being viewed.
Price | Meaning |
Open | First price of the period |
High | Highest traded price in the period |
Low | Lowest traded price in the period |
Close | Last price of the period |
4. Support and Resistance
Support and resistance are areas where price has previously attracted enough buying or selling interest to slow, pause or reverse a move.
They are better understood as reaction zones rather than perfectly precise single prices.
Support
Support is an area where falling price may meet increased buying interest.
When support holds, price can bounce. When price breaks and closes below a well-observed support area, that behaviour can signal that the balance between buyers and sellers has changed.
Resistance
Resistance is the opposite: an area where rising price may meet increased selling interest.
Repeated failures to move above a resistance zone can show that supply remains strong there. A decisive break and close above it can indicate that the market is accepting higher prices.
A level becomes more meaningful when price has reacted to it repeatedly—but no level is guaranteed to hold.
5. Trend Lines and Market Direction
Trend lines connect important swing points and provide a visual guide to market direction.
An uptrend is characterised by rising swing structure, a downtrend by falling swing structure, and a sideways market by price moving within a relatively horizontal range.
A basic trend line can be drawn by connecting two significant highs or lows.
Additional successful tests can make the line more visible to market participants, but trend lines should still be treated as guides rather than fixed barriers.
Key Takeaways
Technical analysis studies price behaviour and historical market structure.
Line charts are simple, while bar and candlestick charts contain OHLC information.
Support and resistance identify areas where price may react.
Trend lines help visualise uptrends, downtrends and sideways conditions.
Price action describes probabilities, not certainties.
Educational Notice: This material is for educational purposes only. It explains general technical-analysis concepts and does not constitute investment advice, a personal recommendation, or a guarantee of future market results. Price patterns can fail, and leveraged trading involves significant risk.
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