The Handbook of Technical Analysis + Test Bank_ The Practitioner\'s Comprehensive Guide to Technical Analysis ( PDFDrive )

Mechanics and Dynamics of Charting

We shall be covering gaps in more detail in Chapter 5, where we will be ana-

lyzing gaps in relation to market phase. The four main types of gap covered are:

1. Common gaps


2. Breakaway gaps


3. Runaway/Continuation/Midway gaps


4. Exhaustion Gaps

3.3 Constant Chart Measures

There are five types of constant measure charts, namely:

1. Constant Time Charts—bar closes when a specified time interval is met, for
   example, Candlestick Charts, Bar Charts, Equivolume Charts


2. Constant Range Charts—bar closes when a specified excursion in price is met,
   for example, Point‐and‐Figure Charts and Renko Charts


3. Constant Volume Charts—bar closes when a specified volume is met


4. Constant Transaction (Tick) Charts—bar closes when a specified number of
   transactions (trades) is met


5. Constant Volatility Charts—bar closes when a specified amount of standard
   deviation or ATR is met

Constant‐time Charts

Constant‐time charts quantize price activity into units of time, or intervals. Each

bar is complete once a specified amount of time has elapsed. Hence, such charts

are also referred to as interval charts. Below are the characteristics associated with

constant time charts:

■ (^) The bar range is variable
■ (^) The bar duration is constant
figure 3.9 Four Types of Gapping Action Representing Areas of Non‐Trading Activity.