V.9:3 (113-115): Time As A Trading Tool by Robert Miner

Time As A Trading Tool by Robert Miner

As a rule, most trading methodologies, or "systems," simply approach market activity from a price perspective. But such an approach is incomplete; such an analysis of market activity is one-dimensional without the other two dimensions that make the study whole. For this reason, while price is a very important dimension of market activity, time and pattern can never be ignored. The key to this kind of analysis and trading plan is to recognize the coincidence of time, price and pattern to indicate change when the market is in a period with a high probability of change, price is at or near a price objective at which there is a high probability of support or resistance and the pattern of the market activity indicates change. Traders have the best opportunity to make a profitable trading decision when all the dimensions of market activity indicate that change is likely.

Most traders who are well versed in Elliott wave analysis are familiar with price ratio relationships between swings or waves. Projecting various price ratio relationships as a market unfolds will project price objectives where a high probability of support or resistance exists; this type of projection also applies to time relationships.

The typical time analysis that traders and market analysts perform is related to the "traditional" cycle theory, which proposes that the market unfolds in specific fixed-length cycles. Because these cycles of fixed-length periodicity are simply averages of past cycles, they represent broad time periods when a high or low is likely and of limited use to the trader. Price activity can be considerable in a few weeks or months and especially in today's markets, where the volatility is increasing steadily. To enter and exit a trade, therefore, a trader must be able to narrow the time period to just a few trading days when the change of probability is high.