One of the things that people criticize technical analysts - aka Chartists - over is random lines. It is an often valid criticism.

Honestly, charts can be a bit like numbers and statistics - they can be twisted to represent whatever point of view one holds.

That's why it is important to remove any bias from charts and technical analysis to the greatest degree possible.

One way to create more cold-blooded, dispassionate charts is to use angles - especially the 45-degree angle famously used by W.D. Gann.

Another method is to use lines drawn at angles. Yes, all lines drawn at charts are drawn at some angle or the other. However, it is useful when drawing channels, support, resistance, etc. to use lines drawn at specific angles. For example, Gann used lines based on multiples of 11.25 - 11.25, 22.5, 33.75, 45, etc.

The 45 degree angle isn't used because it is some "magical" number or looks "pretty" on the chart. A 45 degree angle represents a natural rate of growth over a certain period of time. When price is "squared with time" then you have a defined limit within which price either will or won't reach a certain level.

To achieve the above requires a properly constructed chart. On modern computerized systems of technical analysis tools such as a tool to draw a Gann Square are useful. It also helps to draw your square from an important low to high price.

None of those parameters involve random lines, levels or bias. With gold potential historical levels are $101.00 back in 1976 and $252.80 in 1999. When you see a chart drawn from some other level, not based on a high or low price, you should question whether or not the person who created the chart (if they haven't explained why they chose the level they did) is either consciously, or unconsciously, allowing bias(es) to enter into their analysis.

The above gold chart is constructed from the 1999 low gold price. It's based on a Gann Square that reaches $2,512.20. It's a big square. The construction is a little unusual, but it does allow the 1x2 angle to intersect near the all-time high price and a second peak that occurred in 2012. So, while the construction is a little different, it's probably not so unusual to be questionable or invalid.

The gold price sits within a channel (the two dark 45 degree lines sloping downwards) from 2011. A more standard construction would have based the upward and downward sloping 45 degree lines on a zero price instead of the 1999 low, but the overall placement of the lines shouldn't be drastically different, and the overall construction is consistent which is to say it isn't a mix of lines drawn from 1999 and some other point or from $252.80 and the zero line, etc.

The red channel is based on 15 degree lines. The 15 degree line isn't one you will see on many other (if any) charts on this site. One difficulty with using computer or online technical analysis programs is that it isn't always possible to use fractions of a degree. So, for example, instead of an 11.25 degree angle, it might be necessary to use an 11 or 12 degree line. You will more frequently see charts on this site utilizing 7, 13, 26, 39, 52 and other angles. There isn't necessarily anything special about these lines or numbers except that they show either growth or shrinkage of price over some period of time. They are especially useful to show a "natural" level of growth from a significant high or low price over time. This allows you to see, for example, if the price of gold has grown "consistently" from the 1976 low or not.

While some of these points aren't necessarily "relevant" to the chart seen above, they do go to the point of constructing charts that are "cold-blooded" and dispassionate. So, looking at our chart again...

The gold price is traveling within a large channel based on 45 degree lines. It recently neared the top of the channel and reversed course. This is a pretty normal reaction. The price has also been traveling within a channel defined by the red 15 degree lines. It has been within the red channel since April of 2013. So far, each time price has reached the top of this channel, it has rebounded lower.

Just because the price has remained within the larger 45 degree channel and smaller 15 degree channel doesn't mean it will continue to do so indefinitely. By the same token, the current pattern has been in play for some time so it is not unreasonable to expect it could continue for a while longer until something acts on it. Perhaps price remains within the bigger channel and drops below the bottom of the red channel. Or, maybe price remains within the red channel and crosses sideways out of the big channel. It's possible price moves higher, taking it out of both channels.

The lines aren't psychic. They don't tell us the future. But they are useful as guideposts. They are especially useful when they are constructed in an unbiased manner. A technical analyst or chartist isn't on a team. It isn't a matter of being for or against gold. The price is the price. Patterns and lines are what they are. The lines shouldn't be drawn from the most favorable or unfavorable starting points. The time frame of the chart shouldn't be selected to tell a certain positive or negative story. While daily and shorter charts are useful and necessary (especially for trading and spotting changes in trend), weekly and monthly charts are preferred to see the larger, overall trend. Unfortunately, it isn't uncommon that a chart will reflect the bias or worse of the person who created it.

A good chart too, will likely make you think. It might even make you question your own point of view. Everyone has some bias whether they realize or admit it. But, there isn't room in technical analysis for bias and proper chart construction can help eliminate it to the degree possible. Investing is challenging enough without adding the extra challenge of figuring out if there is an inherent bias or hidden agenda lurking behind some line drawn on the chart.