Market Geometry

If history is an indication of what is most likely to happen in the future, then the same concept can be applied when trading fianncial instruments, currency markets included. Price patterns that happened in the past are likely to repeat in the future. Nothing more real than in trading. And this is when the time element comes into the trading equation.

Trading without taken into consideration the time element is like driving a car without seeing the road. For example, if you are having a head and shoulders pattern with the left shoulder and the head already completed, then looking at the pattern formed on the left shoulder, in terms of how price consolidated in there, the amplitude of the move, the time taken for the shoulder to be completed, etc, and try to apply these elements for the right shoulder, this is being called market geometry. What is happening in the past is likely to happen in the future.

When you are looking at a support area that it is being hit three times before the area it is being broken, then aon a re-test higher at the same area, but this time price coming from the downside it is more likely that it will fail to break the same area on the first two attempts, with chances rising after that proportionally.

When looking at a diamond formation then after the sharp middle movement, you should take a look at what happened on the left side, and project the time on the right side of the sharp movement, and there is your estimated time when price should break that consolidation pattern. This is market geometry too.

Market geometry works best especially in the case of triangles, contracting triangles to be more exact, when price travels in legs of threes. These legs have the tendency to respect both time and price when being part of a bigger leg of a higher degree triangle.

The recording that comes with this chapter will show you a couple of examples regarding this concept and for more in depth analysis of the concepts please take into consideration the book recommendation: “Geometry of Markets”, Bryce T. Gilmore, 1999