Point & Figure Charting - secret weapon?

[RichKid]

Does anyone use this style of chart regularly? I have heard it mentioned very favourably by some very experienced trading authors. For example, Daryl Guppy has an article on it on his website http://www.guppytraders.com/gup140.htm

I'm also looking for a free online charting site (like incredible charts) which shows p&f charts but have had no luck yet. Most require registration and the ones guppy refers to are only temporary subscriptions. I plan to compare my bar charts of stocks I'm watching to the p&f charts of the same stock to see what I can glean. I'm more inclined to go for the classic method that Guppy refers to. He talks about p&f charts in his books (eg Share Trading).

I'd be interested in anyone that finds these useful for trading Australian markets short term (ie not intraday, more weekly or monthly). Guppy emphasises in his book that this is a pure price oriented method (as opposed to volume, time etc). It appears to show up some trends very clearly.

 

[tech/a]

Re: Point & Figure Charting- secret weapon?

P&F is more for longer trading terms as the Reversal amount is usually set at 2 or 3 at various box size values
EG 1C for under 20c
5C to $1
10C to $5 and so on.
It basically filters a lot of short term noise and gives you a clearer representation of price action (So users claim).I only know of one trader who uses it as his charting basis (Actually 2!!).

Theres a guy in the SA branch of ATAA who still hand charts P&F (Which is the way it was done for years) he is about 70 and his All ORDS charts go all around the room absolutely amazing.

As for the secret weapon--- its simply another form of charting like Candlesticks and has its own set of technical patterns.
There are stand alone books on the topic if you look hard enough.

For interest here is MULs P&F chart

 

[RichKid]

Re: Point & Figure Charting- secret weapon?

Hi Tech,
About its use for short term trading- Guppy mentions a format used for intraday charting (in the article I mention above), you can vary the parameters to suit your style he says.
MUL seems to be going down no matter which chart you use but then people holding aren't looking at it from a technical point of view.
I did see some of the particular patterns in one of Martin Pring's books on TA and have seen Regina Meani's (Aussie chartist) book showing how to draw them (it's recommended by her, she says it's good to start from scratch to understand them better but I don't have the time to do it regularly hence the search for free charts online).
I'll have to do more research on this one, your point about the noise is spot on, but sometimes we can try to make charts show what we want to see so I have to be careful when deciding on the format to go with.

 

[tech/a]

Re: Point & Figure Charting- secret weapon?

Sure you can trade P&F in anytime frame.
Guppy has it with Marketcast as I do.If you havent got intraday software then trading intraday or even short term (under a week) with EOD data is like driving a Truck in the Monaco Grand Prix.It will all be over and profits awarded before you get to the finish line.

Because reversal amount is usually 3 increments of whatever your trading most stocks wont register and when they do blind Freddie will be able to see it!
He must be running out of topics for his newsletter.

 

[watsonc]

Re: Point & Figure Charting- secret weapon?

Apart from incrediblecharts.com.au are there any websites that offer free Point and Figure Charting software for the ASX?

thx

 

[ice]

Re: Point & Figure Charting- secret weapon?

It's the only form of charting I use primarily because when I started P&F was the easiest to understand.
Since then I have become so addicted that I don't see the need to bother with other charting, although I must admit candlestick charts are very pretty.

As I only track 10-12 stocks and a few indices I have never progressed from rolling my own in Excel.
Strangely enough I've tried the P&F charts on a couple of packages but they don't cut the mustard. I don't know whether that's because they're a cheap tack-on or whether I need the tactile inter-action from manually updating my own charts.

In the end I don't think it matters what charting you use, all that matters is whether it gives you that bit of an edge. One edge P&F's might offer is that they are so rarely used these days.


ice

 

[coyotte]

At the IC weekly stock picks thread you will find a poster called Capt.
He uses PF quite reguarly with a fair amount of success.

You can sight his charts and comments in the prior weekly posts.


Cheers

 

[Bin57again]

Does anyone have code for Amibroker for P&F? Kaveman put something on there back in 2004 but imagine has been updated...
Tech - who's your P&F chart provider?

 

[tech/a]

Comes with most charting software.
I have it on Metastock,and Tradeguider.

As for being a secret weapon.
Analysis--ANY----analysis has very little value other than for amusement
unless you have a proven methodology to implement it.

Thats of course if your trading,if your just pontificating then---analyse away.

 

[motorway]

Picking up

from the MRC&Co's post

Off-topic, but I read the other day Paul Rotter uses P&F charts.

Interesting.

http://www.trading-naked.com/paul_rotter.htm

q: what timeframes are you using on your charts?
a: usually 5- - 30-min charts for trendlines and indicators. I prefer p&f charts because they give me a clearer view on patterns (triple tops). for indicators I like the CCI because it also shows the volatility of the markets

Ok interesting The Worlds most Successful Trader ...

So why P&F ?

Well there is time frame analysis
Which leads to multi time frame analysis

When your multi becomes so multi as as to contain
ALL time frames

Then you no longer have a time frame
But just the reality of the tape....
Objective waves of buying and selling...

See what you can make of this for some discussion.

I will use part of an interview with
Richard Olsen ---( My comments in the brackets )

Museum Director: Where can we see fractals in
the foreign exchange markets?

Richard Olsen: Fractals symbolise a way of
seeing things, a view which says that the statistical
properties of an object remain similar no matter
whether we look at it on a small, a large or a very
large scale.

(Point and Figure ( just change the box size ))

On the foreign-exchange markets, the
fractal element is very strongly present.



Museum Director: What role is played by the
so-called «strange attractor »? What is it, anyway?
Is that the formula?

Richard Olsen: The strange attractor is a
formula into which different values can be
inserted. The results calculated on the basis of
these values can be portrayed by a graph. That’s
called the «strange attractor ». But hidden behind
that is a very simple formula.


I myself don’t use the term «strange attractor » at
all, as I don’t maintain that the foreign exchange
market is subject to such a formula. It’s much
more complex. So I try to analyse it into its
component parts by first of all using the right
magnifying-glass, so to speak.

(Point and Figure---What attractor is at work in the fluctuations ?? )

To give you a
practical example: if I were blind and had never
seen a table, but had to measure a table, I would
find it enormously difficult to measure it more or
less correctly. I would constantly get put off by the
chairs or by the table’s rounded corners - and
would arrive at completely absurd measurements.


One fundamental problem in analysing financial
markets is that we’re working on the wrong scale,
the wrong time-scale. In other words, we interpret
that scale - the spatial, physical time-scale -
entirely wrongly. We haven’t got any intrinsic time!
So we have to find out what’s meant by the term
«intrinsic time » and how it should be used.

So I’m
much more modest than the adherents of the
strange attractor - to return to that point for a
moment - since I don’t say I’ve got a formula that
can be used to explain the foreign exchange
markets. Instead, I say we’re taking up a wrong
position if we calculate using physical time.


Museum Director: So it’s not a question of
saying «I’m looking for a formula, and when I’ve
got it, then I’ve got the key. » It’s a question of
using various elements such as intrinsic time in
order to get closer to the secret of the markets.


Richard Olsen: Yes. Mandelbrot’s formula is
only an abstract mathematical aid. Everything
depends on how it’s used - in my case, for
example, I have to transform physical time into
intrinsic time and use it to find the right scale.


Museum Director: Is Olsen the first firm to use
a fractal structure as the basis of a profitable
model?


Richard Olsen: Certainly not. There are many
people who have made use of a fractal approach
without knowing. Technical analysis, for example,
is full of fractal thinking. But the people involved in
that don’t talk about a science, they simply start
from experience and see that fractal thinking is
something extremely useful.


(Point and Figure Tape reading )

Museum Director: That’s a very ambitious
approach… So we can say that although really a
whole generation is captivated by these fractal
phenomena, Olsen is more or less alone in this
sector.

( Computers led to the demise of tape reading, Now they are re discovering it.... But I think these ideas are old and have always been at the cutting edge )

Richard Olsen: Absolutely. But it’s important to
realise that that the fractal element is only one part
of the solution. The other is the intrinsic-time
concept. Without that concept, you can’t arrive at
the right solution.
Intrinsic time is a key concept

( The secret of the whole business lays in the fluctuations
anon 1898--unfolding in their own time, motorway 2008 )


Museum Director: So when we talk about
fractal structures, we’ve only got half of it…

( This is Pattern, Pattern is half only half of it )

Richard Olsen: Yes, the other half is provided by
intrinsic time. And if you build that in too, it makes
everything even more fractal. The world only
seems less fractal than it is because we operate
with physical time. But if we replace it by intrinsic
time, the world becomes much more fractal.

( so not weekly daily monthly time frames
But 1 point 2 point 4 point "Figure charts"

Not cutting by time but by (price movements ) )


Museum Director: What’s meant by «intrinsic »?
«Internal »?


Richard Olsen: Intrinsic time is - to put it a bit
drastically - when you think about real life.
In our
normal lives, physical time is a foreign body.

( KEY POINTS , KEY )

Intrinsic time is subjective time, i.e. the individually
experienced speed of the flow of time. And it’s
clear that the flow of time is different for different
objects and circumstances.

( and for different stocks and for the same stock at different times )

In the case of our forecasting models we don’t
even consider physical time. And there lies the key
to the problem.

( See KEY )

It’s important to measure time
according to different scales: in seconds, in
minutes, in hours, days or months.

( ie By volatility )

And in intrinsic
time a minute sometimes has 60 seconds,
sometimes only 10, and sometimes 1,000
seconds. And if a minute has, for example, 1,000
seconds, it means on the one hand that we
experience that minute very intensively and vividly
- but on the other hand, time subjectively seems to
flow slower in that minute.


OK from separate interview

"It's the same concept that's behind point-and-figure charting, except we (try ) do it mathematically instead of visually, which is not an insignificant achievement."

( But does that make it more or less--- than the P&F chart

Olsen heads Olsen Ltd. (www.olsen.ch), which is a combination hedge fund and open research project that has attracted some of the most inquisitive minds in finance - among them Benoit Mandelbrot, whose 1967 article "How Long is the Coast of Britain?" launched the field of fractal geometry.
Olsen's trading platform (www.oanda.com) uses an automated market-making engine developed by his Switzerland-based team of physicists and a Canada-based team of programmers, headed up by childhood friend Michael Stumm.

OK Just a look from one angle

The more angles the better
or maybe not

Just Do It is an option too !

It is saying (IMO )
That
To see the pattern
first dissolve the time frames
So the reality of the tape is revealed..


P&F is one tool
but probably a much misunderstood and underutilized one

So I have focused here on TIME.... The Time Element. ( as it is ,intrinsic time ) via Richard Olsen...

P&F is also about the pattern
and that is important too..

( The other half )

Sound complicated ? Naaaaaa

How simple a P&F chart really is ?

real simple-------Simply Real !



If you can not tell
Then maybe let a P&F chart
Clarify (P&F word )

A clearer view -- Paul Rotter

I had never heard of Paul Rotter
before MRC&Co posted.

So I do not know how he uses P&F
Just for Discussion

motorway

 

[MRC & Co]

Thanks for that Motorway.

Definately something to think about and I can definatley see the value of P&F (will have to give it some more study myself). As you say, it is the reality of the tape. It is surprising it is not as utilized. Wonder how many other great traders use it of which we are not aware of.

Rotter is a scalper, so I can imagine how the use of P&F along with the order book (level 2 data), could be very useful.

 

[tech/a]

Motorway.

Thats the first time Ive seen that (Intrinsic time related to fractal price structures).

Having said that it makes the most sence I am yet to see relative to the time component.---The missing link in most analysis one which Gann and Fibonacci attempt to equate.

Their results to me at least are less than inspiring.
Mainly due to the fact that you can plot many many "Points of interest" which are generally whittled down by confluence in various points over various timeframes.

This leads to a bunch of "Possibilities" which are of little practical value as which if ANY possiblility is accurate cannot be determined ahead of time.

Is it necessary to know?
I dont think the exact one is--but I do believe the a reasonable guide to time would be very handy but not clear in the analysis styles I have investigated.
If I have confluence in 3 very different time lines its not of any help.

I have the "Definative guide to P&F" but yet to study it.

One observation is that fast moves in either direction skew the time element severely often taking price well away from the mean and in doing so also time.
At times the mean is returned just as fast as it was removed from it and at other times the balance takes much much longer to return to the mean.

How do we know when what is likely to occur.
A severe price spike can do 3 things.
(1) Back as fast as it went.
(2) Remain where its is and continue creating a NEW mean both in time and price.
(3) Back to the mean over a great deal longer time (intrinsic time).

Great topic and food for discussion.

 

[motorway]

Without understanding
Intrinsic time and fractals

You won't get the why of P&F ( get lost in double tops and bottoms etc )

Why because P&F is

a chart of fractals in intrinsic time...

This was always the why of P&F from the late 1800 's to today

OK these words are so misused

They are spun out to sell books and courses

and the so called applications are in many cases useless..

But if you start with the less ambitious

Then you will get the most out of P&F

if you do not look at it as a bar chart
without time

Duplessis sort of touches on this

as in the "voice of the market" etc

But that is only a touch...

Wyckoff esp emphasized these aspects
in comparing the way a P&F chart moved compared to a bar chart

though obviously he did not use these terms

Consider fractal dimension

lines 1
planes 2

alternation between the two on price charts

degrees of roughness ( that are predictive )

A P&F chart is this structure revealed

without the lag of a look back period ( this point is significant for various P&F analysis )

Some more from Olsen


"Financial data and fractals have always gone hand in hand - one of the first data sets that Mandelbrot had applied his theories to was that of fluctuating cotton prices over several centuries. "Forget about chaos," Dacorogna tells me. "We have never found any chaos in our data. There is no simple formula that generates such behaviour as is found in the foreign exchange markets.

A fractal is a more general thing. A fractal produces a measure." The measure Dacorogna, Olsen, Müller and the rest of the team were really interested in was that which would measure time.

One of the reasons that physicists like Müller and Dacorogna were willing to pitch in with Olsen was that he had some very interesting ideas about time.

Hitherto, economists had always thought of time as outside of the system, a straightforward linear measure that all other changes could be related to. But the idea which fired up the Olsen team (as only physicists can be fired up) was that time was intrinsic to the system - that it was somehow dynamic and that a measure of time was needed which could stretch and contract as the system changed.

I asked Dacorogna what this meant. "Time eats things," is what he said. "We define time dynamically." Perhaps it's difficult to explain the massive impact of this statement to someone without a background in science or philosophy. With few exceptions, the history of science has been characterised by the tendency - almost never questioned - to use time as an independent measure of an experiment (or of the world in general, in the case of philosophy.)

In the twentieth century, physics has finally begun to break free of this notion that time is independent of space and action. And now the Olsen team - perhaps because a large proportion of them were physicists, and so were doing what came naturally - were junking the idea that time was an independent measure of the financial markets. It was as if they were introducing relativity theory to economics.


Olsen's explanation is just as visceral. "Actually what you can do is, when there is a price movement, you can say how much time has elapsed. Market time. Suddenly you realise that time is very, kind of, you know... you can put your hands around it." But how could fractals connect price changes and time? I still hadn't understood, so I turned to some of the many papers which O&A put out when they were still more academic research centre than rapidly growing business.


This is what I found. Think of the mountains reflected in the windows of their offices. The silhouette of the mountain range is neither one dimensional nor two dimensional - it is somewhere in between, and is said therefore to have fractional, or fractal dimensions. A piece of paper scrunched into a ball is a fractal object; it has more than two dimensions but less than three. Fractal objects have two main characteristics.

The first is that they are "self-similar across different scales". In other words, I can look at smaller and smaller portions of them, and the image I get will still be pretty much the same (imagine zooming in on that craggy mountain range.) Secondly, the apparently random nature of a fractal pattern is not really that random at all; each point is constrained by the position of the point which precedes it.
In the same way that this is true of a mountain range it is true of the price fluctuations in a capital market.

Because each price depends to some extent on the previous price, the market is not a random walk, despite what the EMH says. Remember our drunken sailor. One of the things that made his random walk a random walk was the fact that each step he took was totally independent of the previous steps. And amazingly the self-similarity across scales holds true too - believe it or not, in the foreign exchange market the pattern of volatility measured at ten minute intervals is similar to the pattern of volatility measured at hourly intervals, and similar again when measured at daily intervals.

Olsen's team found that this scaling law applied for lengths of time up to two months and beyond. Not only that, but the scaling law also holds for the frequency with which prices change direction. Market prices didn't obey a random walk however you looked at them.


So if the EMH is wrong, and price does not obey a random walk, what does it obey? After lengthy examination of their ever-expanding database (today the largest of its kind in the world), the team discovered that foreign exchange prices had a "drift exponent" of 0.58. Back to our drunken sailor. If his quayside stumbling is truly random, after 100 steps he will end up neither to the left nor to the right of where he first began (tossing a coin 100 times you'd expect to get around 50 heads and 50 tails.) In this case, we can say that his drift exponent is 0.5 - i.e. that he has no bias towards the left or the right. But say he has a dim idea of where his ship is, despite all the rum he has drunk. Now after 100 paces he always ends up somewhere to the right of the pub door - and this means that his drift exponent is no longer 0.5 but nearer, say, 0.6. (If for every 100 flips of a coin you got 60 heads and 40 tails, you'd begin to get pretty suspicious - in fact, you'd think you had a biased coin.)


To put this into context, look at the behaviour of the European Exchange Rate Mechanism (EMS). When the EMS was constrained in the early 90s, with its currencies only being allowed to fluctuate within certain bands, the drift exponent of the market for these was around 0.5. But when the bands were broadened in 1993, the drift exponent changed - to 0.58. More amazingly, when O&A did a similar study of the interest rate markets (which are not unified like foreign exchange markets but divide up into Western and Eastern regions) they found something very similar. They had found their first law of the markets. Dacorogna calls it the "Capitalism Constant", and hypothesises that any free market situation will have a similar drift exponent. Perhaps unsurprisingly, when O&A first tried to get the paper published, no journal would take it because it contradicted the EMH. "

Ok think back to the early 20th century
Wyckoff et al are making P&F charts form coin tosses and roulette wheels

discovering drift constants etc
and the change from rough (congestion) to smooth..

theory of runs and ''intrinsic time"

How this behavior stays constant as the chart is condensed
etc

( fractal )

etc etc

The text I have marked as bold
could easily be a P&F description from 1927.

Maybe it is

Thing is all this can sound like B#llS*it

But then you look at a P&F chart
and that fractal world of intrinsic time
is there in full view

Two basic patterns of structure
Two basic patterns of time

combine to make the fluctuations
that are revealed on the P&F chart

and these patterns alternate
because

each point is constrained by the position of the point which precedes it

each point . each phase.

To say more will be giving away

free golden gooses :


motorway

 

[tech/a]

To say more will be giving away

free golden gooses

And the motive for delivering to "a Point" in a discussion is?

Thats like me presenting all the test results for techtrader and not coughing up the formulas,whilst continuing to discuss it at length.

Many people give away free golden gooses.
Do we have to pay for yours?

 

[tech/a]

Its been about 10 yrs since I have studied P&F

Back then I didnt have the access to the material thats available today.
Around half way through Du Plessis excellent work.

Certaintly more to P&F analysis than I originally gave it credit for.
Runs in parallel to Market Profile (Plotted differently of course).

An excellent work for those who wish to gain a grounding in this form of analysis.

I'm finding many golden gooses.

 

[Timmy]

P&F a good subject for discussion, thanks tech/a.

I haven't read Du Plessis.

How do you go about choosing box size and reversal criteria? For me I try to relate the box size and reversal to the sort of scale moves I am looking for. Of course, you can use a number of different box size/reversal criteria if you are running a number of PF charts (one for bigger picture view, one for smaller picture etc.), but the main PF I use is scaled to relate to my R/R.

Another use to which I try to put the PF is some VSA analysis; instead of choosing a time-based bar/candle for VSA work I use a PF scaled how I want it. I don't use the PF exclusively by the way, I use it in conjunction with bars/candles, but there is something about the logic of using VSA on a chart that is scaled according to the moves I want that appeals to me. Also, VSA on PF is still very much a work in progress with me.

BTW, putting volume on the PF chart is a technical challenge. The program I use didn't plot the volume how I wanted it so I had to use a work-around. Clunky but it works and I am used to it.

 

[fimmwolf]

In his video, Using point and figure charts to analyze Markets,Tom Dorsey, explains that he uses point and figure charts to trade futures.

Dorsey recommends a 3 box reversal method transfer.

x's represent buyers ( move price up )

o's represent sellers ( move price down )

Simplified example Dorsey gave:

a stock at any price must make 3 consecutive move before it would be significant enough to record in the adjacent coloumn.

A buy signal is where a coloumn of x's exceeds a previous coloumn of x's (see 46)

conversely, a sell signal is where a a coloumn of O's exceeds a previous coloumn of O's.

You can use any scale.

Charles Dow invented the method, though he used the actual price in his charts. Not x's and o's. That developement occurred later around 1920.

 

[It's Snake Pliskin]

Can someone say why the P and F method is a secret weapon?

 

[motorway]

A

buy signal is where a coloumn of x's exceeds a previous coloumn of x's (see 46)

conversely, a sell signal is where a a coloumn of O's exceeds a previous coloumn of O's.

Those are rules of a trading system...Some P&F chartists might do the opposite....

A X moving above the previous column of X is a bare fact
whether it is a "BUY" signal is a trading system rule

Charles Dow invented the method, though he used the actual price in his charts. Not x's and 0s. That development occurred later around 1920.

Available sources tend to negate the theory that Dow invented them
They seemed to have become known from ~ 1881
Dow made mention of them in his editorials

The earliest X and O charts I have seen are from the 1920's
The earliest charts I have seen only had little ticks or crosses or dots
Figures do seemed to have gained an early following
But sometimes the examples used of old charts were obviously for educational purposes

eg The "Game in Wall street" 1898

uses figures to teach the construction
but only little ticks for the trade examples

The chart is called a Fluctuation Chart

This is often referred to as the first published instruction on these type of charts...


J M Klein's Course in chart and method was published 1904 ( only seen reference to it ) was supposed to be connected to "Hoyle" of The Game.

A person watching the tide coming in and who wishes to know the exact spot which marks the high tide, sets a stick in the sand at the points reached by the incoming waves until the stick reaches a position where the waves do not come up to it, and finally recede enough to show that the tide has turned.

This method holds good in watching and determining the flood tide of the stock market. The average of twenty stocks is the peg which marks the height of the waves. The price-waves, like those of the sea, do not recede at once from the top. The force which moves them checks the inflow gradually and time elapses before it can be told with certainty whether the tide has been seen or not.


The market is always to be considered as having three movements, all going on at the same time.


There are three phases to both a primary bull market and a primary bear market
The formation of a "line" in the averages indicates accumulation or distribution

The market represents a serious well-considered effort on the part of far-sighted and well-informed men to adjust prices to such values as exist or which are expected to exist in the not too remote future

Charles Dow

This "line" is how an active trading range looks on a P&F chart

elsewhere Dow states these lines form build and flow into diagonals..

This description of the tides and waves would come naturally to someone watching

"Figure Charts"

The first recognized fully fledged book is by Victor de Villiers ( with Owen Taylor )
~1934
What many do not appreciate is De Villiers was a long time associated with
Richard Wyckoff..

What Dorsey writes as Point and Figure is really a trading system
of buy and sell signals that makes use of Point and Figure Charting

Point and Figure charting has a rich history present and future..

Where are the buy signals
Where you decide they are
depending on what "system"

For Dorsey this is a break of resistance

For Wyckoff it could well be at the opposite side of the pattern ( where that tide turns )

Some people regard a stock (or the market) in this (springboard)
position only when it breaks through an old line of resistance or
support into a higher or lower field. I claim that the beginning of
the springboard move is at the bottom of a range of accumulation, or
in the upper levels of a range of distribution.

For DeVilliers ... It was about buy and sell signals too
But Fulcrums and catapults

But Wyckoff---

From the general formations (not so-called patterns such as “saucers,” “baskets,” “fulcrums,” etc., which are popular with some purely theoretical technicians) on the figure charts we are able to detect accumulation or distribution, and we see, clearly marked, the lines of support and supply. We can also identify the marking up and marking down periods to excellent advantage by means of these charts.

To say a P&F chart is double tops and bullish support lines
IS to say bar charts are only about heads and shoulders and moving averages..


Underneath all P&F methods are the principles and essence that make it what it is .....

Classically

1 box reversal charts where the foundation for all analysis
from which 3 and 5 box reversal derived

A P&F chart needs many definitions
a digital filter
The flow of a ( superior ) map of volatility


The trading systems have extensive history

but to get at the essence questions like why are 45 degree angles drawn
what is the logic of counting need some consideration

as in everything

DYOR

motorway

 

[motorway]

Can someone say why the P and F method is a secret weapon?

I can say why some of the econophysicist say that

consider this

Problem with Volatility Measures ( He is talking about daily and weekly time frames )

Volatility for the two series are identical
Could be better described by directional change

Measuring directional change

Set a size, r% (say 0.1%)
Record the "last high" and "last low"
A new last high is recorded when:
It is above the last high
Or it is r% above the last low
A last low is recorded similarly
A change of direction (event) is defined as a "last high" followed by a "last low" or vice versa
Record the number of events

These events really describe a P&F chart

What does he use these events for

A scale of market shocks
and the basis for forecasting

Why because each "event" is
constrained by the event that precedes it ( not like a fair coin toss THIS IS VERY IMPORTANT POINT.... P&F chart is a manipulation detector )

But only it seems when mapped in intrinsic time

Problem with Volatility Measures

Now you can not predict
because you only know the intrinsic time of the past and present

Not the future

But you can forecast like like weather forecasting
because you can identify
high and low pressure systems
dynamically..

clock time is 100% predictable
next Thursday at noon
it will be 12 O'clock

But you can not forecast with that sort of time

only "intrinsic time"

What the Boxes are woven from


I have looked at P&F from 360 different degrees
I am still seeing new aspects...

Because

each point is constrained by the position of the point which precedes it

Each point is also released ... tension & relaxation

If you chart a fair coin toss , a random string. what would the chart look like ?
what would happen as you increase the condensation ( move to 3 and 5 reversal and modify box sizes ) .... The opposite that happens with a non random string...

P&F is a digital filter arranged as a decision tree

A chart of information and equivocation

( Claude Shannon )

test and response . cause and effect ( RDW )

I was convinced that the trading frequency measured a fundamental heartbeat of financial markets. Clearly it reflected the flow of information. It turns out also to be closely related to measures of liquidity.

Another Econophysicist etc

And the motive for delivering to "a Point" in a discussion is?

Thats like me presenting all the test results for techtrader and not coughing up the formulas,whilst continuing to discuss it at length.

Many people give away free golden gooses.
Do we have to pay for yours?

I have no link on my posts to any pay per view offerings

There is nothing to buy from me...

I thought ASF was a discussion forum
And no one is obligated to discuss
or continue to discuss
we are all FREE

motorway