The New Market Wizards: Conversations with America's Top Traders

by Jack D. Schwager

There’s a simple consideration that absolutely invalidates all such angles-of-certain-size methods in a single swipe: The size of an angle on a bar chart is not invariant to changes of scale. For instance, consider the technique of drawing a line from the low of a move at a 45-degree angle. If you do this on two charts of the same contract but with different time and price scales, say from two different services, the 45-degree lines will be different. They will subsequently intersect the price series in different places. In fact, the angle of a line joining two prices on a bar chart is not a property of the price series at all. It depends completely on what units you use for price and time and how you space them on the chart, all of which are quite arbitrary. There are good methods and bad methods, but these angle techniques are no method. As an aside, note that trend lines that involve connecting two or more points on the price series are invariant under changes of scale and, hence, make sense in a way that lines determined by slopes do not. On differently scaled charts, a given trend line has different slopes, but it intersects the price series in precisely the same places.