Range Charts Vs. Time Charts: Which Is Better

In financial markets, range charts and time charts are two ways to visualize price movements over a specific time.

Range charts show an assets high and low prices over a given period. They do not show the passage of time but rather the range of prices that were achieved during the time period. This makes range charts particularly useful for identifying trending markets.

On the other hand, time charts show the passage of time on the horizontal axis, with the price of a security plotted on the vertical axis. Time charts can be used to see how the price changes over time, and they are often used to identify trends and chart patterns.

There are advantages and disadvantages to using both range charts and time charts.

Some advantages of range charts include the following:

• They highlight key levels of support and resistance, which can be helpful for traders looking to enter or exit positions.
• They can help traders identify trends and chart patterns more efficiently since the passage of time is not shown on the chart.

Traders are often correct on the direction of the market; they just ‘time’ it incorrectly. Range charts can be a powerful tool if this has been an issue you are dealing with when it comes to the financial markets.

Some disadvantages of range charts include:

• They do not show the passage of time, which can make it difficult to see how the price of a security has changed over a specific period of time.
• They may not be as useful for traders looking to make longer-term trades, as they do not show the full picture of the price movement.

These disadvantages can be mitigated, however, as long as the trader keeps an eye on a time chart every now and then.

Some advantages of time charts include the following:

• Because they show the passage of time, traders can make longer-term investment decisions that they otherwise would not be able to make on range charts.
• They can be useful for identifying trends and chart patterns, unlike range charts which often miss simple patterns such as triangles, head & shoulders, and channels.
• Time charts are far more useful when it comes to identifying support and resistance zones.

Some disadvantages of time charts include:

• It can be tough to pick precise entry points on a time chart when it comes to trending markets because traders have to factor in the dimension of time in their analysis. This often leads to trades being entered too early.

Take a look at the chart below. It compares an hourly chart of Crude Oil Futures to a 33-range chart. You can see how difficult it is to time the entry using the hourly chart because the time element is involved. The range chart, in a way, removes time as a factor in trading, giving a smoother appearance meaning they can be a mighty tool in trending markets.

In conclusion, time charts and range charts both have their place in technical analysis. When it comes to taking entries on pullbacks once a defined trend has been identified, I find it far more useful to utilize range charts simply because it removes the element of us having to time the market on top of being correct on our analysis.