HOLLOW POINT TRADING
Essential Technical Analysis Tools
Technical analysis uses historical price and volume data to forecast future price movements. These seven tools form the foundation of most trading strategies.
The Core Toolkit
- Moving Averages — Trend identification and dynamic support/resistance
- RSI — Momentum and overbought/oversold conditions
- MACD — Trend strength and momentum shifts
- Bollinger Bands — Volatility and price extremes
- Volume — Confirmation of price moves
- Support/Resistance — Key price levels
- Fibonacci Retracements — Potential reversal zones
1. Relative Strength Index (RSI)
RSI Trading Rules
Overbought (>70): Price may be due for pullback. Look for sell signals.
Oversold (<30): Price may be due for bounce. Look for buy signals.
Divergence: RSI moving opposite to price often precedes reversals.
2. MACD (Moving Average Convergence Divergence)
3. Bollinger Bands
4. Support & Resistance
📈 Support Levels
Price levels where buying pressure exceeds selling. Price tends to bounce here. The more times tested, the stronger the level.
📉 Resistance Levels
Price levels where selling pressure exceeds buying. Price tends to reverse here. Broken resistance becomes support.
5. Fibonacci Retracements
Key Fibonacci Levels
23.6% — Shallow retracement, strong trend
38.2% — Moderate retracement, healthy pullback
50.0% — Psychological level (not true Fibonacci)
61.8% — "Golden ratio" — deep retracement, key level
78.6% — Very deep, trend may be reversing
Combining Tools
- Confluence is key — Multiple tools agreeing = stronger signal
- Don't use everything at once — Pick 2-3 complementary tools
- Context matters — Tools work differently in trends vs ranges
- Volume confirms — Always check volume on breakouts
Build Your Toolkit
Master these core tools before adding complexity. Start with moving averages and support/resistance, then add RSI or MACD for confirmation.
Remember: indicators are tools, not crystal balls. They work best when combined with sound risk management.