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Module 6 · Basics · Final

Introduction to technical analysis

How markets move, Japanese candlesticks, support and resistance, trends, multi-timeframes, and the role of volume.

📚 6 lessons⏱ ~40 min🎯 Final quiz
Module 6 / 6100%
1
Why markets move
Supply and demand, nothing more
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Price moves up when more buyers than sellers, down when more sellers than buyers. Period. All "complex" theories boil down to this.

Technical analysis tries to identify imbalances in supply/demand BEFORE the rest of the market sees them. That's why it works (when it works): probabilities, not certainties.

The mindset to adopt: a setup is never a guarantee. It's a hand of cards with positive expected value. You play the cards well, the math takes care of the rest over the long run.
2
Japanese candlesticks
Reading the price-time map
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A candlestick contains 4 prices over a fixed period:

  • Open: price at start
  • High: maximum reached
  • Low: minimum reached
  • Close: price at end

Important patterns:

  • Bullish engulfing: big green candle covering previous red = reversal signal
  • Pin bar / Hammer: long wick = rejection of a level
  • Doji: open ≈ close = market indecision
  • Strong/weak candles: large body = conviction, small body = hesitation
3
Support and resistance
Levels where price reacts
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Support: price level where buying interest exceeds selling pressure (price bounces up).

Resistance: price level where selling pressure exceeds buying interest (price bounces down).

Why do they work? Memory bias. Traders remember levels where price has reacted in the past and place their orders there. Self-fulfilling prophecy.

Rule of 3: a level is significant if price has touched it at least 3 times without breaking. Past 4-5 touches without breaking, expect a break eventually (the level loses strength).
4
Trends: identifying directions
The trader's best friend
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Three possible states:

  • Uptrend: succession of higher highs and higher lows. Trade long, avoid shorts.
  • Downtrend: succession of lower highs and lower lows. Trade short, avoid longs.
  • Range: price moves between support and resistance. Trade reversion (buy support, sell resistance).

Simple tools to identify:

  • EMA 50 and EMA 200: if EMA 50 > EMA 200 and rising = uptrend
  • ADX > 25 = trending market, ADX < 20 = range
  • Bollinger Bands width: narrow = range, wide = trend
5
Multi-timeframes
Looking at the big picture before zooming in
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Trade with the higher timeframe wind. Concrete example:

  • Daily chart: identify general trend (up/down/range)
  • 1H chart: identify key support/resistance levels
  • 5min chart: precise entry setup

If daily is uptrend, take only LONG setups on 5min. Don't fight the higher trend.

Common mistake: seeing a reversal signal on 5min and shorting in a clear uptrend on daily. You shoot yourself in the foot 8 times out of 10.
6
Volume: the underestimated indicator
Confirms or denies what price says
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Volume = number of contracts/shares exchanged in a period. Critical interpretations:

  • Breakout with high volume: real interest, the break has chances to hold
  • Breakout with low volume: probably a fake break (false breakout)
  • Reversal candle with high volume: strong signal of capitulation
  • Trend with decreasing volume: warning, the move loses steam

Volume is what differentiates real movements from noise. Always look at it before pulling the trigger.

Module quiz

3 questions to validate your knowledge.

1 What's a pin bar / hammer candlestick?
2 Daily uptrend, 5min reversal signal — which trade do you take?
3 Breakout with low volume = ?
0/3
You completed Level 1 — Basics 🎉

You now have the foundations: prop firms, edge and systems, psychology, risk management, technical analysis. On paper, you know what's needed to pass a prop firm challenge.

Here's the reality the statistics promise you: 95% of prop firm traders lose their account before the first payout. And the primary culprit is almost never the strategy — it's the mindset sabotaging execution at the critical moment (Module 4 explained why).

The durable way out is automation. Not a magic edge. Just giving your strategy the chance to be executed faithfully, without a stressed human being able to sabotage it. That's exactly what you'll learn in Level 2 — describe your strategy to Claude Code in English, turn it into Pine Script, wire up execution to your prop firm. Without coding a single line yourself.

See Level 2 — Auto Beginner (199 CAD) →

Module 1 of Level 2 entirely free · No commitment

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