Time, the most important trading tool.

I’d like to talk about what I believe is the most underrated and overlooked aspect of the markets, time. There are many well known Vertical price levels including Fibonacci/Gann levels, pivot points, round numbers, support and resistance even daily/session highs. My philosophy is that all of these horizontal levels should be an afterthought, the last thing you consider before placing a trade. There are also many indicators which include price and time such as moving averages, trend lines and oscillators. However there are very few traders or methods that use time as the main component. To the best of my knowledge, the only well known trader who uses time as the primary predictor of price is W.D. Gann, arguably the best trader of all time. If you are not familiar with his feats read: http://www.traderslog.com/ganninterview/

Gann was without doubt an absolute genius and learning his methods is like going down a rabbit hole. To take the very most basic principle however is that the markets do tend to follow certain, predictable cycles just like most things in life. Here is some examples of his methodology, note the emphasis on dates and time.

As you can see, Gann was able to identify and use key dates and times alone to successfully predict major tops and bottoms in the market. His trading results were documented and authenticated real time and he famously predicted major events in the markets with spooky accuracy many years in advance.

Just being consciously aware this principle can greatly help your trading and eliminate common errors. A common trait of new traders is that they will panic when price moves suddenly, worried that they will miss the move. The feeling is that price will keep moving in a straight line and they will be left behind so the jump on board. Invariably, price will then start to move the other way and they will get out thinking that it will keep going the other way. When you understand the role of time in the markets you can start to identify the key points in time and project a much clearer picture. If you draw a line from each swing high to the next (or lows to lows) you will get a completely different view of the chart instantly. You will see the price either gradually accelerating or losing momentum. When you examine the distance from one swing to the next you can also see a pattern purely in time. At the beginning of a larger move, the swing will gradually get further apart and become closer together as momentum slows again. With this knowledge you can begin to predict when as well as where the next peak or valley will occur. I don’t want to give you too many rules on how to use this because I believe that it is much more important to understand the overall picture which is being revealed than on specific numbers or methodologies. Experiment and try to predict future swings on time alone. Write down the number of periods between the major swings and see if any of the sequences occur on the chart below.

As a brief example of how you can use time to trade, if the main trend is an uptrend and there are lower lows on a smaller time frame connect the main points. There will usually be a progression like this where the lines gradually become flatter. 

As the main trend is an uptrend you should be looking to buy. The above example could be called an inverse head and shoulders pattern. If you follow the pattern of the lines, you can project the likely direction of the next low. If you measure the time periods between the previous lows and write them down, you can also estimate the time of the next low. Where the lines connect is the perfect place to enter. If you then look at the indicators mentioned earlier such as fib lines pivot points, trend lines etc, you can find the highest probability trades with small, well protected stops and great risk:reward. At the same time you can make sure you get the value with your exits.