The Price x Time Angle

Written by:
Patrick Mikula CTA
Mikula Forecasting Company
www.MikulaForecasting.com
support@MikulaForecasting.com
Copyright © 2008 by Patrick Mikula All Rights Reserved.

 

A valuable analysis tool is to draw angles on a chart that have a slope measured in a ratio between chart price units and time units. The diagram below shows a simple chart with a price scale that has increments of 10 and a time scale with increments of 1 month. The angle that slopes up from the bottom left has a slope that moves up 1 price unit for each time unit. This is a 1 x 1 slope. It is possible to have a line that slopes up at any price to time radio, such as 1×2, 1×3 and so on.

1x1 Angle diagram

 The chart below is an example of using a price x time line. This chart is a daily chart for the S&P500 symbol ^GSPC. The price unit used on this chart is 2 price units for each daily bar. The price unit must be set by the trader based on the time frame of the chart. The price unit used on intraday time frames such a 5 minute chart will need to be smaller than the price unit used on a long term chart such as a monthly chart. Starting from the bottom labeled “A1″ I have drawn a 1×1 angle upward. Starting from the bottom labeled “B2″ I have drawn a 2×1 angle upward. At the top right side of this chart I have circled a major change in trend. Notice that the change in trend top was on top of both the 1×1 angle and the 2×1 angle. It is a very common occurance for tops and bottoms to form on price x time ratio lines which start from previous tops or bottoms.

1x1 angle