Chan Theory: Chart Structures, Divergence, and Multi-Timeframe Trade Signals

Summary

This overview describes Chan theory as a chart-analysis framework built from nested price structures. It moves from processed candlestick fractals to strokes, segments, and overlapping consolidation zones, then classifies larger moves as advances, declines, or ranges. It also uses divergence—price making a new extreme without comparable indicator strength—as a possible sign of weakening momentum.

The framework maps these structures to three classes of entry or exit points and proposes using higher timeframes to establish context while lower timeframes locate signals. The page is a conceptual summary, not a rigorous specification: definitions and thresholds can vary, and no systematic test, execution rules, or risk-adjusted results are supplied. Its account of a reported high annual return is an attributed claim without supporting evidence in the document, so it does not establish profitability.

Key ideas

• The framework builds chart structure from fractals, strokes, segments, and overlapping zones.
• It distinguishes trends from consolidation and uses divergence to assess possible loss of momentum.
• Three classes of trade points are associated with reversals, retests, and moves away from consolidation zones.
• Multi-timeframe analysis uses larger structures for direction and smaller structures for timing.
• The document provides no validated performance study, and its definitions may require further specification.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.