OK, my friend, grab your aspirin:
All due respect to all of those (and you know who you are) that know much more about these things than I do;
Regarding the "time factor";
Work with me here for a minute or two. <g> It is my belief that what you call "time" is a device used by humans to measure the movement of things. On my home planet, we have different words for different kinds of time. [nardblandf] means, roughly, "boring time", [stengblandf] means things like watching your options premiums today...you get the idea.
Time is a pretty basic idea. Without it, we would be forced to look at everything in a very different way. If you look at the concept of time by relating it to movement, you can get what I am talking about.
To put it a different way; no movement equals no time.
So, the basic idea of time is important. In fact, it is essential to the way we observe things. Therefore, if we are told to ignore it, or to pay no attention to it, we may feel a bit...annoyed.
Perfectly natural, IMHO, nothing to be concerned about, I myself have gotten into trouble on at least 2 occasions in the past 50 years by ignoring time.
Now, how does this relate to technical analysis? Different ways to different dudes. One well respected TA dude, Thomas DeMark, has a whole section in his book, "The New Science of Technical Analysis" where he discusses what he believes to be the significance of time as it relates to a chart. I don't want to rip him off, but basically the idea revolves around how far back the pattern occurred and how it relates to how significant it is tomorrow. It's actually quite interesting.
Further, I can absolutely guarantee you that some chart formations that I follow, and that are extremely accurate and extremely successful, use the factor of time to a great degree. In fact, since we are talking about time as it relates to TA, let's give it the TA lingo; let's call time a "filter". In one particular chart pattern that I use, time is the "primary filter"; in other words, I look at the time factor of the chart first, and if it does not fit the program, I'm done, I look no further.
Similarly, DeMark's explanation of one of his overall patterns uses time as one of several primary filters, and almost everyone knows the "long flat base" pattern in TA, one of the best buy signals on the planet when the stock starts to move up afterwards. The longer the base, the higher the move. Time is a primary filter.
Now, what about P&F? Various people have described P&F as "time-neutral", or "ignoring time", (the way it was first described to me, and the reason I didn't check it out 20 years ago), but I think the truth is closer to;
P&F does not use time as a primary, or even a secondary, filter.
Time does exist on a P&F chart, if we agree on my definition above. If there is movement, then by definition, there must be time.
Tom Dorsey, in "Point and Figure Charting",
amazon.com
talks about time throughout the book. For example, on pg. 48, ‘The Spread Triple Top and Bottom' he says:
"This pattern is simply a triple top that takes a little more space on the chart to complete."
Now, that sounds like time to me. No question about it.
But what is the point here? The point, as I see it, is that P&F uses a different set of filters; a different set of "basic underlying rules" if you will. The entire subject is based upon the piffer agreeing that supply and demand are the primary filters, or to put it another way, "The way you look at the chart is based primarily on factors other than time".
This is, I believe, the reason why people who have already studied other forms of technical analysis have some trouble with P&F. It's hard to shake that underlying filter, "time is important, time is critical, time is a primary filter". They are being asked, they think, to throw out something that is very important, if not absolutely essential, to an understanding of what is going on around them. That's not an easy thing to do! Ask any wife who didn't get an anniversary card, and you'll find that supply and demand are sometimes based on time as a primary filter!
So, don't throw away your understanding of time and its importance, you are absolutely correct, it is important. But at the same time, try and understand that there is more than one way to look at a chart.
That's how I started making some sense of P&F. So far, so good. |
