Definition of support: support is a point on a chart where the probabilities work in the favor of at least a temporary halt in the prevailing upward trend. Buyers are the people that pose support in a sellers market (i.e. period when people are selling).

Edwards and Magee in their book; Technical Analysis of Stock Trends, defines support as buying, actual or potential, sufficient in volume to halt a downtrend in prices for an appreciable period. This means that supports act as solid zone (floor) that restricts the downward flow of erosion. How long to hold depends on the; thickness, height, and the amount of water flowing down.

Definition of resistance: resistance is a point on a chart at which the weights of evidences favors at least a temporary halt in an up-trending market.

Again, a classical book by the same authors quoted above defines resistance as ‘selling, actual or potential, sufficient in volume to satisfy all bids and hence stop going higher for a time.

In common parlance, supports are floors while resistances are ceilings. Demands are concentrated in a particular area for it to become a support (floor). I underlined the word concentrated just to draw your attention to the fact that supply and demand are by definition always in balance. The amount of shares or gold bought must equal the amount sold irrespective of the price it is selling at.

What determines the price level is the amount of enthusiasm exuded by buyers or sellers. If the foregone sentence is true, then support areas will mean areas on a chart where sellers become less enthusiastic or less willing to let their money or asset go and buyers saw reasons to be temporarily motivated.

Some people believe that supports and resistances occur in round numbers. Their reason is that participants in the market work on sentiments and have made up some psychological numbers to work with e.g., $400 for gold in the mid-1980s, and 1990s, the Dow in the 1970s and late 1990s.

Please note that there is no such thing as permanent support or permanent resistance. Price that you see support today can turn out to become resistance tomorrow. This will now smoothly take us to an often asked question about supports and resistances.


I have no ready made answer for this question but will allow you to leverage on my wealth of experience as a successful trader. Below are what I call five basic rules for the occurrence of resistance and supports:

1. The higher the volume of instruments exchanged (traded) at a particular price, the more likely that that zone (price) will turn into either a support zone or resistance zone.

2. Fast movement in price is likely to suggest a support or resistance

3. The more powerful the move preceding the support or resistance zone, the greater its potential as a barrier. Don’t get your self confused over this as it may sound to be contradicting the previous point. There is a difference between speedy and lengthy moves and a powerful move.

4. Breaking of any significant support or resistance zone suggests that there is a price breakout.

5. Supports or resistances are less likely to occur if the time lag between previous challenges of support or resistance zone is large.

Proper understanding of supports and resistances are vital to your knowledge toolbox as a technical analyst traders of any commodity or instrument.

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A Technical analyst is an expert who gives professional advice. A gold dealer predicting the price movement of gold with the aid of charts, trends, prices and other indicators is a technical analyst. Also, a stockbroker who offers advice on shares to either buy or sell is a technical analyst.

Even a forex trader making use of candle sticks to predict price movement is a technical analyst. In fact, a technical analyst is anyone who has had a fairly success in predicting the prices of commodities.

There are some technical analysis functions that will require you to acquire some formal education while some does not need any formal education before you can become a technical analyst. Financial analysts for instance need some kind of professional qualifications before he or she is allowed to parade him or her self as a financial (technical) analyst.

Note that predictions of technical analysts are not perfect as they are not prophets or sorcerers. All they do is make predictions based on empirical evidence. This is to say that information coming from technical analysts still needs to be censored before one uses it. Other non technical factors need to be properly evaluated so as to make high quality economic decisions.


Trade successfully: armed with the ability to analyse raw data and make prediction from it, you don’t go hungry anymore as you can even borrow money and trade profitably. Buying commodity with another person’s money is known as short selling. You can even undertake to trade for third parties.

Consultancy services: information is the most valuable and most sought after commodity in the market today. People are ready to get information at any cost provided it will give them value for their money. As a technical analyst, you can sell signals to aspiring commodity traders like gold traders or currency traders. I have made a lot of money giving people signals of gold and shares (common stocks).

Respect: the respect that people will accord you just by knowing that you are a technical analyst. I brag whenever I am being called upon as a technical analyst to give talk in seminars. You too can be highly respected and connected. You may get opportunity to be in economic or other technical summit board of your region.

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Technical analysis is the use of scientific tools to forecast price movement of a commodity. It is based on reading prices through charts. Technical analysis can be defined as a well articulated process of identifying trends at an early stage, getting into the trend and stay with it until you see heavy evidence against it.

I really don’t like the fact that the phrase ‘technical analysis’ is used to describe this process. This sounds a little mis-normal as what is actually done in technical analysis is to determine price based on the attitudes of those already in the market and that of those intending to get into the market.

If there is one thing to take home from technical analysis, it is the fact that you must not go against a trend until it reverses. A trend reverses when there is a weight of evidences pointing to it. This includes; trendlines, moving averages, momentums, candle sticks, etc.

In all that you do, always remember that technical analysis doesn’t have to be perfect. In fact, it is far from being perfect even when you correctly interpret a situation. That is to say that you don’t put all your trust in technical analysis but, will have to complement it with fundamental analysis wrapped in common sense analysis. Hey! I don’t attack me with this as there is nothing like common sense.

If you really want to succeed in trading commodities, you must firstly learn to keep things simple. Do not let anyone confuse you with some complex and sophisticated analysis. It doesn’t matter what kind of trader you are; short-term trader, long term trader, day trader or simply a scalper, technical analysis still remains the same. Again, it does not matter what commodity you are dealing on; gold, silver, shares, currencies (forex), etc.

This happens to be the first post of this blog, I encourage you to stick to this blog, devour all the contents that will be coming on a fairly regular basis.

Technical analysis is not a rocket science. Again, all it takes it keeping things really simple.

To your success as a trader!