Why Ratios Work

Every level in Part II was a percentage. Not a price, not a distance in pips or points, but a proportion of the range: fifty percent, ten percent, one hundred and ten percent. Part III steps back to ask why that is the right way to build a ruler — and why a ruler built any other way would break the moment you changed the chart.

The Problem With Absolute Distances

Suppose you tried to build the framework out of fixed distances instead. “Buy when price bounces forty pips off the low.” “Confirm a breakout when price is twenty points past the high.”

The rule would work on the chart you designed it on and fail everywhere else. Forty pips is a large move on a four-hour candle and nothing on a monthly one. Twenty points is a breakout on one stock and a rounding error on another. Every time you changed the instrument or the timeframe, you would have to rebuild the rule from scratch — and traders who work this way spend their careers doing exactly that, tuning parameters that stop working the moment volatility changes.