Tuesday 6th December 2011

No, we're not channelling Public Enemy. We're talking range charts vs time charts.

Range charts are great... I love them.

However they're not the be all and end all solution to your trading problems. There is a lot of hype in some areas of the trading education world to the effect that range charts have changed the game and in many respects have made time based charts obsolete.

Absolute rubbish!

Both are derived from exactly the same underlying data; it's just displayed in a different way.

Both have pros and cons. And so it's up to you to trial both (along with tick and volume charts and any others that may appeal to you) to find the method of display that best suits your strategy and your personality. It might even be that you end up displaying both range and time charts alongside each other, to gain two perspectives of the underlying price movement.

The primary advantage of range charts is that they remove the aspect of "time". The argument is commonly made that trading decisions are based upon price levels, so we should chart our market in a way that only prints a new bar as new price levels are achieved. And range charts certainly do this well.

However this perceived advantage (removal of any sense of time) is also sometimes a disadvantage. Time is also a factor in a trader's decision making. Anyone who has entered on a breakout and then had price stall for 30 seconds, 1 minute, 1 minute 30, then 2 minutes, certainly knows the power of time. Your trade has not moved into drawdown, but it's not moving in your preferred direction either... you're sweating this one and getting closer and closer to scratching with every second of further delay.

Likewise a rapid move for or against your position will influence your ongoing trading decisions.

Let's look at one example from today's Crude Oil session, in which the time chart shows something not visible on the range charts. Timeframes are low, as that's what I trade, but the concept applies regardless of market and timeframe (as with pretty much everything I teach on my blog or in my course).

So, don't believe the hype!

Test and evaluate for yourself!

That's good advice for everything you get from any educators, including myself!