The Chart Angle Delusion

February 20, 2013
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“The lack of intrinsic meaning of angles on a bar chart has significance even for chart-oriented traders who do not employ angles. How sharply a trend slopes on a chart is often a psychological consideration in making a trade. If you fall prey to this influence, you’re letting the chart maker’s practical and aesthetic considerations impinge on your trading. Any trend can be made to look either gentle or steep by adjusting the price scale. ”

- William Eckhardt, New Market Wizards

JS Comment:

If you use price action as a filter — and visually interpret charts as part of your process — how do you guard against the chart angle delusion?

One potential remedy is focusing on hard inputs that are independent of chart aesthetics. High and low point successions, moving average crosses, and volatility expansion / contraction (changes in average trading range) are three examples.

Another helpful practice is deliberately viewing more horizontally extended (flattened) charts in tandem with the main view (as such mutes the ‘exciting angle’ temptation)…

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2 Responses to The Chart Angle Delusion

  1. Anon on February 26, 2013 at 9:07 am

    MT TRADING PSYCHOLOGY FIELD GUIDE, PART I: Amazingly written. No BS. Only the facts.

    • Jack Sparrow on February 27, 2013 at 9:30 am

      Thanks! Wait’ll you see Part II…

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