In trading world, you might see some people, novice traders or even novice coders, who use the concept of slope in charts & trading. For example, they might look at the below yellow line and say, it’s might be around 45° slope (angle).

However, there DOESN’T EXIST ANY SLOPE in trading. Don’t get misleaded.

Let’s summarize it shortly…

Chart is a joint of multiple bars. Bar is just a representation of O/H/L/C values. Let’s say, we have a bar:

    or the same is:    

However, what is the width of the bar ? NO-ONE CAN SAY IT.
So, what I want to say is that, the representation of the BAR is just a virtual. You can zoom in/out the chart or Y-axis and get the bar distorted. So, when you see such bars:

and you think it has some slope, actually, that’s totally false. There is nothing like a slope between them. If you have just open the chart and initially you that scaling (any platform scales the chart fully randomly, depending on your screen, monitor size and chosen timeframe…) and you will see the above image, just a mouse click, or scroll, or zoom a chart and you will see the same bars like this:

Do you think it’s still 45 ° slope? no, probably it’s now 15 ° .
But wait… Let’s zoom out the chart to narrow the chart:

Ouch,  the same 3 bars !? … where is our 45° or 15° slope?   Now it’s around 80° slope !

What’s going on there? …

Well, In Math/ Geometry, when we have same resolutions for X and Y axis, then there exists ABSOLUTE RELATIVITY AND ABSOLUTE PROPORTIONS (as opposed to relative proportions):
So, there can exist only 1 correct proportion to represent the rectangle of 5cm and 10cm, because they are of SAME DIMENSIONAL types. They always have the CORRECTLY MEASURABLE relativity with each other.

However (as opposed to geometry), chart-bar representation is totally virtual, because the X axis is timeframe, and Y axis is price.  They doesn’t have any absolute relativity with each other,  instead they are visually connected with each other, and THEIR SCALING IS JUST A VIRTUAL THING, WITHOUT ANY RELATIVITY, and they are changed/displayed depending :

So, BAR doesn’t have any real proportions toward TIME or VALUE axis, so, no one can say what is slope.  THE SAME LINE can have from angle to 89°, depending on the above listed variables. REMEMBER, THAT THERE DOESN’T EXIST EVEN A DEFAULT SCALING !  We totally recommend to avoid using any kind of geometrical terms (i.e. slope) in calculations for trading.

What are alternatives

Alternative (if it can be so) could be to use the real mathematical functions and values. For example, instead of slope (geometry) we suggest to use i.e. percentage (math) , which is not dependent on scaling, instead it can be just calculated (i.e. percentage increase/decrease between 2 bars or like that). So, if price changed from 56 to 62, we wouldn’t say something false, like it had i.e. +11° slope (no one can say if it’s either 3 or 11 or 43 ° angle, because slope is just virtual), instead we can say, it had +10.7 percent increase!

Leave a Reply

Your email address will not be published.