The Three Dimensions of Market Activity
Every aspect of the market must be taken into consideration for consis-
tently successful trading and investing decisions- There are two criteria
that should be met for any technical analysis methodology to be included
as pan of the decision making aspect of a trader's trading plan:
1. The analysis technique must be simple and easy to understand both in
regards to theory and application.
2. The analysis technique must provide the critical information well in
advance that is needed to make a trading decision. In other words, we
are primarily concerned with leading indicators of market activity, not
lagging indicators. There are a thousand indicators that will tell us what
the market has done, WE want to know with a high degree of reliability
what the market should do in the immediate future.
The three important dimensions of market activity - time, price and
pattern - meet the two criteria described above. Most trading plans only
include one, or at the most, two of these important market factors. A
comprehensive trading plan that is concerned with having the greatest
probability for success will include information from all three dimensions
before a trading decision is made.
Time
We must have a time projection methodology that allows us to project
with a high degree of consistency the future periods of time that have