How many of you out there have heard something about time and price being equivalent? When I first heard that I had no idea what it meant.
Today, we are discussing the basic idea behind time / price equivalency and how you can use it to predict future market reversals and swings.
Look at Figure 1. The explanation is on the chart itself.
Right now, you may be a little confused, so let me explain further. I discovered this little insight while asking myself a question.
The question I asked was, “If time and price are really the same thing, then shouldn’t I be able to take price and flip it on its side so that it becomes time? And, time should then point to something significant in the future, correct?”
So, at that moment, I got rather excited and went to test my theory. Initially, I only thought I would get a reversal date, which I did.
Then, I realized I could use this simple technique on major tops and bottoms in any market and time frame and also start to predict market swings as well.
Figure 1 is an example of this. Now, take a look at Figures 2 through 4.
Notice that, on Figure 3, I measured a price bar top. The future date turned out to be a reversal and the beginning of a small up swing.
Figure 4 is the same as 3, only I flipped the ruler to show the measurement into the future.
You can apply this technique to any market and time frame.
A Word of Caution
This method is not perfect, nor does it work 100 percent of the time. Also, the fact that it is mechanical in nature (because you have to draw lines on your chart and measure) can also cause some error.
Why You Should Paper Trade This Theory
Take some time to paper trade what you’ve learned today. I trust you will be pleased with the results.
When learning new information, you should always fully test in real time over and over again until you gain confidence in the method.
I don’t recommend going out tomorrow, after you’ve read this article, and betting the farm in the market.
Just because a person may have some knowledge as to when a market will turn doesn’t mean that he or she will automatically become a great trader.
To become a consistently profitable trader takes a lot of hard work and dedication.
So, please use common sense while testing any new information you learn. Don’t take anything at face value; test it and let it prove itself to you.
Then, you will have confidence born from your own personal experience rather than from what someone else says.
Futures and options trading involve high risk, and you can lose a lot of money. When investing in futures, you may lose more than your original investment. When purchasing options, you may lose all of the money you invested. According to many experts, most individual investors who trade commodity futures or options lose money. There is a substantial risk of loss in trading futures and options. Do not risk money you cannot afford to lose. Past results are not necessarily indicative of future results. There is no guarantee that the information in this article will generate profits for the reader. All charts are provided by FutureSource, a product of eSignal.
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Tags: Online Investing
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