Section 2 - Chapter 2 - The X Axis - CMT Level 1 Short Notes 2025

Section 2 - Chapter 2 - The X Axis - Presented by Rohan Sharma - The CMT Coach - Chartered Market Technician CMT Level 1 Study Material - CMT Level 1 Chapter Wise Short Notes - CMT Level 1 Course Content - CMT Level 1 2025 Exam Syllabus Visit Site : www.learn.ptaindia.com and www.ptaindia.com

1. Chapter 2 – The X Axis Section 2 - Charts - Market Price Data Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

2. Agenda The X Axis Time-Based Charting A Closer Look at Time-Based Data Intervals Activity-Based Intervals Price-Based Intervals This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

3. Key Facts on the Fractal Aspect of Charts 🔹 What Are Fractals in Charting? • Self-Similarity: Price patterns repeat across different time frames, from 1-minute to monthly charts. • Fractal Geometry in Markets: Just like natural fractals (e.g., snowflakes, coastlines), price movements exhibit similar structures at different scales. • Multi-Time Frame Analysis: Trends, support/resistance, and patterns observed on a smaller time frame often mirror those on a larger time frame. • Chaos Theory & Market Behavior: Markets are influenced by a mix of randomness and repeating structures, making them partially predictable . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

4. Key Facts on the Fractal Aspect of Charts Fractal Aspect of Charts

5. Fractal Characteristics in Charts This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Feature Description Self-Similarity Small patterns repeat on larger time frames. Scaling Market structure remains similar whether zoomed in or out. Fractal Trends Trends contain mini-trends inside them. Fractal Reversals Smaller reversal patterns often foreshadow bigger reversals.

6. Key Facts on the Fractal Aspect of Charts How to Use Fractals in Trading 1. Multi-Time Frame Confirmation • Align short-term setups with larger time frame trends. • Example: If the daily trend is bullish, look for buy signals on the 1-hour chart . 2. Fractal Indicators (Bill Williams' Fractal Indicator) • Identifies swing highs/lows by marking price pivots. • Buy Signal: Break of a previous fractal high. • Sell Signal: Break of a previous fractal low . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

7. How to Use Fractals in Trading How to Use Fractals in Trading 3 . Support & Resistance Levels • Fractal-based levels on higher time frames act as stronger support/resistance. • Minor fractals on lower time frames help refine entry points. 4. Trend Continuation & Reversals • Fractal Breakouts: When price breaks a series of fractal highs/lows, trends tend to continue. • Fractal Compression: A cluster of small fractals signals an upcoming big move. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

8. Key Facts on the Fractal Aspect of Charts 🔹 Pros & Cons of Fractal Analysis ✅ Pros: ✔ Helps spot trend reversals & breakouts. ✔ Useful for multi-time frame trading. ✔ Works well with support/resistance and Fibonacci levels. ❌ Cons: ✘ Fractals can be lagging indicators (appear after the fact). ✘ Can create false signals in choppy markets. ✘ Best used with other indicators (e.g., moving averages, volume analysis). This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

9. Step-by-Step Guide: Using Fractals in Trading 🔹 Step 1: Understand the Fractal Indicator • A fractal high (sell signal) forms when a bar has two lower highs on both sides. • A fractal low (buy signal) forms when a bar has two higher lows on both sides. • Fractals can be plotted automatically in most trading platforms (MT4, TradingView , etc .). 📌 Step 2: Multi-Time Frame Analysis • Identify the main trend on a higher time frame (e.g., Daily or 4H). • Use a lower time frame (e.g., 1H or 15M) to find fractal-based trade setups. ✅ Example: • If the Daily trend is up, look for fractals confirming higher lows on the 1H chart for entry. • If the Daily trend is down, look for fractals confirming lower highs for short trades . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

10. Step-by-Step Guide: Using Fractals in Trading 📌 Step 3: Identify Key Fractal Breakouts • Buy signal: When price breaks above the last fractal high. • Sell signal: When price breaks below the last fractal low. • Confirmation: Combine with moving averages (e.g., 50 EMA), volume, or Fibonacci retracement. ✅ Example Trade Setup (Fractal Breakout & Retest Strategy): 1. Price forms a bullish fractal low at a support level. 2. A break above the last fractal high confirms a buy entry. 3. Enter after a retest of the breakout level. 4. Set a stop-loss below the previous fractal low. 5. Take profit at the next resistance/fractal high. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

11. Step-by-Step Guide: Using Fractals in Trading 📌 Step 4: Combine Fractals with Other Indicators This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Indicator How It Helps Moving Averages Confirm trend direction before taking trades. Fibonacci Levels Fractals often align with 38.2% or 61.8% retracements. Volume Profile High volume confirms strong fractal breakouts. MACD / RSI Helps filter out weak fractal signals.

12. Step-by-Step Guide: Using Fractals in Trading 📌 Step 5: Risk Management & Optimization • Avoid taking every fractal signal—use trend direction as a filter. • Set stop-losses below/above recent fractals to manage risk. • Backtest fractal settings on different time frames & assets. ✅ Best Time Frames for Fractals: • Swing Trading: Use Daily & 4H charts. • Day Trading: Use 1H & 15M charts. • Scalping: Use 5M & 1M charts (with additional filters). This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

13. Time-Based Charting Key Facts: 1. Definition: Time-based charts plot price movements at fixed time intervals (e.g., 1-minute, 5-minute, daily). Each candlestick or bar represents a set time period. 2. Common Types: o Line Chart – Connects closing prices over time, ideal for trend analysis. o Bar Chart – Displays open, high, low, and close (OHLC) for each time interval. o Candlestick Chart – More visually detailed than bar charts, showing bullish/bearish sentiment. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

14. Time-Based Charting Key Facts: 3 . Pros: o Easy to analyze trends & patterns. o Works well for traditional technical indicators (moving averages, RSI, MACD). 4. Cons: o Can be misleading during low volatility (lots of small candles). o Lagging in fast-moving markets. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

15. Time-Based Charting This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Time Frame Best For Common Uses 1-Min, 5-Min Scalping/Day Trading Quick entries/exits 15-Min, 30-Min Intraday Trading Identifying short-term trends 1-Hour, 4-Hour Swing Trading Trend continuation & reversals Daily, Weekly Position Trading Long-term market trends Monthly Investment Strategy Macro trend analysis

16. Interpretation & Strategy Tips 1. Trend Analysis: o Higher time frames show dominant trends (e.g., if the daily chart is bullish, 5-minute pullbacks are buy opportunities). o Lower time frames help refine entry/exit points. 2. Support & Resistance Levels: o Stronger on higher time frames (weekly/monthly SR levels are more reliable). o Lower time frame SR levels are weaker but useful for scalping. 3. Multiple Time Frame Confirmation: o Always align lower time frames with the dominant higher time frame trend. o Example: If the daily trend is bullish, look for buy setups on the 1-hour chart . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

17. Interpretation & Strategy Tips 4 . Volume Analysis: o Combine with price action to confirm breakout strength. o Low volume in consolidation → Potential breakout soon. 5. Avoid Overtrading: o Shorter time frames create more signals, but not all are valid. o Stick to a clear strategy and confirm with higher time frames. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

18. Activity-Based Intervals in Charting 🔹 What Are Activity-Based Intervals? Unlike traditional time-based charts, which print a new candle at fixed time intervals, activity-based intervals generate new candles based on market movement or trading activity. These methods help filter out market noise and provide a clearer view of price action. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

19. Cheat Sheet : Activity-Based Intervals in Charting This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Chart Type How It Works Best Used For Tick Chart A new bar forms after a set number of trades (e.g., 100 trades per bar). High-frequency trading, scalping. Volume Chart A new bar forms after a set number of shares/contracts traded (e.g., 1,000 shares per bar). Trading based on volume surges, liquidity analysis. Range Chart A new bar forms when price moves a fixed number of points (e.g., 10 pips per bar). Trend-following strategies, volatility-based trading. Renko Chart Only prints a new brick when price moves a set amount in one direction. Filtering noise, identifying strong trends. Point & Figure (P&F) Chart Plots Xs (up moves) and Os (down moves) based on price changes, ignoring time. Pure price action analysis, avoiding market noise.

20. Activity-Based Intervals in Charting Interpretation & Strategy Tips 1. Tick & Volume Charts for Scalping: o More bars during high volatility, fewer in slow markets. o Ideal for detecting order flow & liquidity shifts. 2. Range & Renko Charts for Trend Clarity: o No noise from time-based fluctuations—only movement matters. o Works well with moving averages & breakout strategies . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

21. Activity-Based Intervals in Charting Interpretation & Strategy Tips 3 . Point & Figure for Pure Price Action: o Focuses on price movement only, ignoring time & minor fluctuations. o Great for long-term trend following & breakout spotting. 4. Best for Volatility & Momentum Trading: o Activity-based charts react to market conditions, unlike time charts which can print useless candles in slow markets. o Helps in avoiding false signals that occur due to low activity. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

22. Price-Based Intervals & Point-and-Figure (P&F) Charts 🔹 Key Facts About Price-Based Intervals Price-based intervals generate new bars only when the price moves a specific amount, ignoring time. This helps traders focus purely on price action and reduce market noise . Types of Price-Based Charts & Their Uses This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Chart Type How It Works Best Used For Renko Chart A new brick forms when price moves a set amount (e.g., 10 pips). Trend following, filtering noise. Range Chart A new bar forms when price moves a fixed range (e.g., 5 points). Identifying breakouts & consolidations. Point-and-Figure (P&F) Chart Xs (up moves) and Os (down moves) are plotted when price moves a set amount. Pure price action analysis, trend reversals, and support/resistance zones.

23. Point-and-Figure (P&F) 🔹 What is a Point-and-Figure Chart? • Ignores time – only price movement matters. • Uses Xs for rising prices and Os for falling prices. • A new column (switch from X to O or vice versa) forms only when price reverses by a certain amount (called the reversal size). • Helps identify support, resistance, trends, and breakouts with less noise. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

24. Point-and-Figure (P&F) This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

25. Point-and-Figure (P&F) 🔹 Pros & Cons of P&F Charts ✅ Pros: ✔ Reduces noise by filtering out minor price movements. ✔ Clear trend direction & breakout signals. ✔ No distractions from time-based fluctuations. ❌ Cons: ✘ Not ideal for very short-term trading (scalping). ✘ Requires experience in setting box/reversal sizes for different assets. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

26. Point-and-Figure (P&F) Interpretation & Trading Strategies 1. Trend Analysis o Uptrend: Consecutive X columns with higher highs. o Downtrend: Consecutive O columns with lower lows. o Reversals: A column shift signals a potential reversal. 2. Support & Resistance o Strong price levels are visible as repeated reversal points . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

27. Point-and-Figure (P&F) Interpretation & Trading Strategies 3 . Breakout Trading o Breakouts occur when a new column forms beyond previous highs/lows. 4. Patterns to Watch o Double Top Breakout: Bullish signal when a new X column exceeds a prior X column. o Double Bottom Breakdown: Bearish signal when a new O column drops below a prior O column. o Triple Top/Bottom Breakouts: Stronger versions of double tops/bottoms . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

28. Price-Based Intervals: Range Bars 🔹 Key Facts About Range Bars • Time-independent: A new bar forms only when price moves a set range (e.g., 10 points). • Fixed Price Movement: Each bar has the same range, filtering out market noise. • No Fixed Time Intervals: In low volatility, bars form slowly; in high volatility, bars form rapidly. • Removes Whipsaws: Helps eliminate small price fluctuations seen in time-based charts. • Best for Trend-Following Strategies: Makes it easier to spot breakouts, momentum shifts, and support/resistance levels. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

29. Price-Based Intervals: Range Bars This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

30. Price-Based Intervals: Range Bars Interpreting Range Bars & Trading Strategies 1. Trend Trading o Identify higher highs & higher lows (bullish trend). o Identify lower highs & lower lows (bearish trend). 2. Breakout Confirmation o Breakouts are more reliable since noise is filtered out. o Use volume confirmation to validate the move . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

31. Price-Based Intervals: Range Bars Interpreting Range Bars & Trading Strategies 3 . Reversal Signals o Sudden large range bars may signal momentum exhaustion. o Watch for range compression before trend reversals. 4. Combine With Indicators o Moving Averages: Align entries with trend direction. o RSI: Identify overbought/oversold levels for reversals. o MACD: Confirm momentum shifts. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

32. Price-Based Intervals: Range Bars 🔹 Pros & Cons of Range Bars ✅ Pros: ✔ Eliminates unnecessary noise from small price fluctuations. ✔ Clearly defines trends, making entries and exits easier. ✔ Works well for scalping and day trading in volatile markets. ❌ Cons: ✘ No time-based reference, which can be difficult for event-based trading. ✘ Requires backtesting to set the right range size for different assets . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

33. Price-Based Intervals: Range Bars 📌 How to Use Range Bars in Trading 🔹 How Range Bars Work 1. A new bar forms only when price moves the predefined range (e.g., 5 points). 2. Wicks (highs/lows) may exist, but every bar has the same fixed range. 3. The number of bars adjusts to volatility—fewer bars in slow markets, more bars in fast-moving markets . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Strategy How It Works Trend Identification Smoother trends with fewer false signals. Breakout Trading Clear breakouts from consolidation zones. Support & Resistance More reliable S/R levels as noise is filtered out. Scalping & Intraday Trading Faster execution during volatility, removes time constraints.

34. Price-Based Intervals: Tick Bar Chart 🔹 Key Facts About Tick Bar Charts • Transaction-Based : A new bar forms after a set number of trades (ticks), regardless of time. • Filters Market Noise: More ticks = more bars; fewer ticks = fewer bars, helping to smooth price action. • Better for High-Volume Markets: More bars form when trading activity increases, reducing lag in fast markets. • Removes Time Bias: Unlike time-based charts, tick charts adapt to market activity, making them useful in volatile conditions. • Scalping & Day Trading Focus: Works well for short-term strategies as it captures trade flow dynamics. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

35. Price-Based Intervals: Tick Bar Chart 🔹 How Tick Bars Work 1. A new bar forms after a fixed number of trades (e.g., 100 ticks per bar). 2. Each bar represents trading activity, not time. More bars appear in high-volume periods, fewer in low-volume periods . 📌 How to Use Tick Charts in Trading This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Strategy How It Works Trend Following More tick bars appear in strong trends, helping confirm direction. Scalping & Short-Term Trading Faster updates than time charts, providing more trade signals. Breakout Trading Breakouts are more defined as bars adjust to volume. Volume-Based Confirmation Works well with volume indicators to gauge trade activity.

36. Price-Based Intervals: Tick Bar Chart Interpreting Tick Charts & Trading Strategies 1. Momentum Confirmation o Fast-forming bars indicate strong momentum. o Slow bar formation signals low interest or consolidation. 2. Breakout Trading o Tick charts show clearer breakouts than time-based charts. o Use volume analysis to confirm validity . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

37. Price-Based Intervals: Tick Bar Chart Interpreting Tick Charts & Trading Strategies 3 . Trend Identification o More bars forming quickly → Strong trend. o Fewer bars forming slowly → Weak trend or ranging market. 4. Reversal Detection o Look for long wicks + high tick count as signs of rejection zones. o Combine with RSI or MACD for additional confirmation. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

38. Price-Based Intervals: Tick Bar Chart 🔹 Pros & Cons of Tick Charts ✅ Pros: ✔ Removes time-based noise, focusing only on trade activity. ✔ Helps in scalping & day trading by adjusting to market activity. ✔ Provides smoother price action compared to time charts. ❌ Cons: ✘ Less useful for long-term trading. ✘ Tick count selection requires optimization for different assets. ✘ Not all platforms support tick-based charts. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

39. 📌 Volume-Scaled Charts (Volume Bars) 🔹 Key Facts About Volume Bars • Transaction-Driven: A new bar forms only after a predefined number of shares/contracts are traded (e.g., 1,000 contracts per bar). • Filters Market Noise: Increases clarity by reducing small, low-volume price fluctuations. • Adapts to Market Activity: More bars form in high-volume periods; fewer in low-volume periods. • Time-Independent: Unlike time-based charts, volume bars adjust to actual market participation. • Useful for Institutional Flow Analysis: Helps track large orders and liquidity shifts. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

40. 📌 Volume-Scaled Charts (Volume Bars) Volume Bar Chart Cheat Sheet 🔹 How Volume Bars Work 1. A new bar forms only after a fixed number of contracts/shares are traded. 2. More bars appear in high-volume periods, fewer in slow periods. 3. Each bar still contains OHLC (Open, High, Low, Close) data, just like time-based charts . 📌 How to Use Volume Bars in Trading This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Strategy How It Works Trend Identification Smoother trends as low-volume noise is filtered. Breakout Trading Ensures breakouts are supported by real trading activity. Liquidity Tracking Reveals institutional buying/selling patterns. Scalping & Day Trading Faster bar formation during high activity periods.

41. 📌 Volume-Scaled Charts (Volume Bars) Interpreting Volume Bars & Trading Strategies 1. Trend Confirmation o Fast-forming volume bars indicate strong momentum. o Slow-forming bars signal weak trends or consolidation. 2. Breakout Trading o Breakouts with high-volume bar clusters are more reliable. o Low-volume breakouts are more likely to fail ( fakeouts ). This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

42. 📌 Volume-Scaled Charts (Volume Bars) Interpreting Volume Bars & Trading Strategies 3 . Divergence & Reversals o Price rising but volume bars slowing down? Potential reversal ahead. o Volume spike on a reversal candle? Strong rejection zone. 4. Works Best With Volume Indicators o Combine with VWAP (Volume Weighted Average Price) for trend confirmation. o Use OBV (On-Balance Volume) to detect accumulation/distribution. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

43. 📌 Volume-Scaled Charts (Volume Bars) 🔹 Pros & Cons of Volume Bars ✅ Pros: ✔ Filters out low-activity periods, providing cleaner price action. ✔ Adapts to market conditions, unlike fixed-time charts. ✔ Ideal for identifying institutional orders and liquidity zones. ❌ Cons: ✘ Not useful for assets with low trading volume. ✘ Requires custom settings for different assets (e.g., 1,000 contracts for stocks, 10,000 for forex). ✘ Some trading platforms don’t support volume bars natively. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

44. Comparison Cheat Sheet: Tick Chart vs. Volume Bar Chart vs. Range Bar Chart This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Feature Tick Chart Volume Bar Chart Range Bar Chart How Bars Form After a fixed number of trades (e.g., 100 trades per bar). After a fixed volume of shares/contracts is traded (e.g., 1,000 contracts per bar). When price moves a fixed range (e.g., 10 pips/ticks from high to low). Time Factor ✅ Varies (more bars in active markets, fewer in slow markets). ✅ Varies (more bars when volume surges). ❌ Time-independent (bars form only when price moves a set amount). Volume Consideration ❌ Ignores trade size (1 large trade = 1 small trade). ✅ Directly based on volume traded. ❌ Ignores volume; only price movement matters. Market Activity Reaction ⚡ ✅ More bars appear in fast markets, fewer in slow markets. ✅ Highlights institutional buying/selling pressure. ✅ More bars in volatile markets, fewer in consolidations.

45. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Feature Tick Chart Volume Bar Chart Range Bar Chart Noise Reduction ✅ Filters out unnecessary time-based noise. ✅ Reduces noise by focusing on volume. ✅ Eliminates random price fluctuations. Best For Scalping, high-frequency trading, short-term analysis. Swing trading, volume-based strategies, tracking institutional activity. Trend-following, breakout trading, reducing market noise. Weaknesses Can be too fast during high volatility, ignores volume. Not effective in low-volume markets, ignores price movement. Can create excessive bars in volatile markets, ignoring volume. Ideal Market Futures, Forex, Stocks (fast-moving). Stocks, Futures (high liquidity markets). Forex, Futures (trend-based markets). Comparison Cheat Sheet: Tick Chart vs. Volume Bar Chart vs. Range Bar Chart

46. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia Comparison Cheat Sheet: Tick Chart vs. Volume Bar Chart vs. Range Bar Chart

47. Next Chapter 3 – The Y Axis Section 2 - Charts - Market Price Data Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia