Published on: February 7, 2025
The Price by Time indicator is an innovative tool in the technical analysis toolkit, designed specifically for Point & Figure (P&F) charts and Line Break charts. Developed by Prashant Shah, this indicator adds a layer of insight into understanding price action by factoring in the time element. While traditional P&F charts focus solely on price movements and reversals, the Price by Time indicator introduces a novel way to quantify the relationship between price movement and time, providing traders with a deeper understanding of market trends.
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The Price by Time Indicator: Concept and Construction
The Price by Time indicator is based on the premise that the amount of time taken to produce a certain number of boxes (representing price movement) in a P&F chart significantly impacts interpreting the strength of the trend.
The indicator is calculated as:
Price by Time = Count / Days
Essentially, it measures the time required for a price to make a given move, providing a more granular perspective on market behaviour.
- Price & Time Relationship: The core idea of the Price by Time indicator is to analyse the duration it takes to produce a given number of boxes in a column. The column itself represents a swing move, typically between a price peak and a price trough, but the number of days (or time) spent in that move is variable.
- Columns and Swing Moves: Each column in a Point & Figure chart represents a specific swing move in the price. The column is formed when a trend reaches a certain price threshold, and the reversal rule is triggered when the price moves in the opposite direction by a specified amount (e.g., 3 boxes). The length of the column (the number of boxes) represents the magnitude of the price move.
- Time & Column Length Calculation: The Price by Time indicator divides the length of a column by the number of days in which that column was formed. This gives a measure of how long it took to generate the observed price movement. A column’s time-based measure offers valuable context—whether the price movement was quick and sharp, or slow and consolidated.
Key Interpretations of the Price by Time Indicator
The Price by Time indicator offers valuable insights into the market’s behavior, which can be used to confirm the strength or weakness of a trend. Here are the key points for interpreting this indicator:
- Long Time with Short Price Movement (Consolidation): When it takes a long period of time to produce a relatively short column (a small number of boxes), this suggests that the price has been moving within a tight range without significant trend strength. This could indicate consolidation or indecision in the market. A period of slow price action without a reversal suggests that market participants are hesitant, and the trend lacks momentum.
- Short Time with Long Price Movement (Strong Trend): Conversely, when the time taken to form a column is relatively short compared to the number of boxes (significant price movement), it indicates a strong trend. A sharp, rapid move in price within a brief period suggests momentum, as the market is moving decisively. This could signify that a strong, underlying trend is in place, and the price is quickly reflecting the strength of the move.
- Tight Range Consolidation Without Reversal: A long duration without a reversal or price breakout indicates that the market is in a tight consolidation phase. This could be a period of accumulation or distribution, where market participants are waiting for a trigger before the price breaks out or reverses. In this context, the Price by Time indicator can serve as a precursor to potential price movement, as the market may eventually choose a direction after the consolidation phase ends.
- Time-Weighted Analysis of Volume and Trend Strength: While traditional analysis may focus purely on the price movements or volume data, the Price by Time indicator adds a time component, allowing traders to understand how sustained the trend is. In combination with other indicators, it can help confirm whether the trend is likely to continue or if it’s running out of steam.
Practical Applications in Trading
The Price by Time indicator is a versatile tool that traders can use in a variety of ways. Here are some practical applications:
- Trend Confirmation: When combined with other technical indicators such as Moving Averages, the Price by Time indicator can help confirm trend strength. A quick, strong move in a trend with minimal time spent in consolidation could serve as a confirmation signal that the trend is likely to continue.
- Breakout Anticipation: By monitoring the time taken for price movements to occur, traders can anticipate breakouts or breakdowns. A prolonged period of low price movement in a column may signal that the market is due for a breakout, and the Price by Time indicator can help predict whether the upcoming move is likely to be strong or weak.
- Volatility Analysis: Volatile markets often have rapid price movements within short time frames. By analyzing the Price by Time indicator, traders can gain a better understanding of how price volatility is impacting trend development. A low time-to-price ratio could suggest that volatility is driving rapid price moves.
- Stop Loss and Risk Management: Since the Price by Time indicator helps gauge the strength and sustainability of a trend, traders can use it to determine optimal stop-loss placements. For example, if a column has taken a long time to develop without a strong price movement, it may suggest that a reversal is more likely, and stop-losses can be adjusted accordingly.
Conclusion
The Price by Time indicator is a valuable addition to the toolkit of any trader using point-and-figure charts. Incorporating the time element into the traditional P&F framework provides a more nuanced view of the market, allowing traders to assess not just the price movement but also the time spent within that movement.
Understanding the relationship between price movement and time helps traders identify trends, consolidation phases, and potential breakout points with more clarity. While it can be used in conjunction with other indicators, the Price by Time indicator stands on its own as an effective tool for measuring the momentum and strength of market moves. Whether you’re a day trader or a longer-term trend follower, mastering the Price by Time indicator can significantly improve your market analysis and trading strategies.
