Point & Figure Charting - secret weapon?

motorway · 24 October 2008

The volatility on the large scale
is the container of the volatility on the smaller scale

100pt x 1 reversal chart

this is very important chart atm

Just a quick update
To understand why
needs an understanding of some topics not discussed as yet

concept of "work" , "trend constants" and why both produce a 45 degree movement on a time series subject to manipulation ( as distinct from random )

1 box reversal charts continually generate areas of congestion
horizontal counts quantify this congestion

( trends last as long as counts are generated, activated and fulfilled

Fractals are like.. a ball , in a case , in a large trunk, inside a large container

All are moving in the present moment
all have their followings ( eg the ball is Day traders )

So it is not that useful to
chart the container with a monthly chart
the trunk with a weekly
the case with a daily and the ball with a 15 min

esp when the the large container
has been thrown over a cliff ...

In the marketplace, this characteristic scale is the investment horizon of the participants. As long as there is no characteristic scale, as long as everybody has a different investment horizon, the market is fractal and is resilient to unexpected information.

Dow said there were 3 horizons that made for a healthy market

Wyckoff said 4

Wyckoff defined them in terms of scale as well as time

motorway

motorway · 25 October 2008

We can represent a manipulated market by a biased coin toss

Where the bias is caused by the distribution of participants
on the coin

And a toss is caused by that distribution becoming "one sided" to degree
that activates a directional change

What is a trend ?
It is where demand or supply continues to overcome it's opposite
in a series of waves.... backing and filling...fluctuations

Reversals---- "Events"

P&F because it stops and starts ( what real resistance and support is, dynamic -something met up ahead ).

continually meets support and resistance
and continually overcomes it ( or not )

This process is "work"
The only time the chart does no work is when it stops..

What does work produce ?
A movement on average over a cycle that is 45 degrees
( cyles have different degrees )

Ths is because completed cycles are condensed and because the chart slows and stops when something ( the other side ) is met that retards it .

Trend constants
1 box reversal 2 to 1
3 box reversal 5 to 3

3 box reversal charts have special affinity to the 45 degree movement
because at some stage early in P&F development

It was recognized that a major cycle could be defined by a 45 degree movement on a chart that had an asymmetric filter.

Such that reactions against trend needed 3 units to be registered.

Such a chart , as long as on average there is a 5 unit move UP
for every 3 unit move down will conform to a 45 degree movement

When the UP cycle ends a transitional phase leads into a down cycle
where the same 5 unit thrust Vs 3 unit reaction will operate , again conforming to a 45 degree movement

The coin remains biased for long periods for a number of reasons
at bottom is the one that everyone is "following" ( some as of this moment have no choice...forced moves )

100 pt x 1
100 pt x 3

These charts will reveal
when the "waves" build down (RDW)
and we should follow the action down to 50pt 25pt 10pt
even 5pt charts

Wave: Intraday, Minor, Intermediate, Long term, Fluctuations that build-up & build-down and form trends. Actually every upward or downward swing in the market whether it amounts to many points, or only a few points, or fractions of a point consists of numerous buying & selling waves.
These have a certain duration, they run just so long as they can attract a following. When this following is exhausted
for the time being that wave comes to an end and a contrary wave sets in. These waves represent the shifting relationship of Supply to Demand.

RDW

P&F is a chart that does not treat
Price Volume or Time as separate entities
it weaves them together ( Wheelan )
into "events" ( Olsen)

That Reveal

motorway

mr.x · 26 October 2008

in regard to point &figure charts richkid try hubb financial. does most exchanges including asx. I know it does p&f for the likes of bhp but dont know about the smaller end. Good for end of day mohtly yearly etc for candles. its free.

sails · 26 October 2008

mr.x said:
in regard to point &figure charts richkid try hubb financial. does most exchanges including asx. I know it does p&f for the likes of bhp but dont know about the smaller end. Good for end of day mohtly yearly etc for candles. its free.

Not sure if it applies to the software you are suggesting, but Hubb's software has been known to work only with their data supply. So the expensive software purchased may not work if a cheaper data supply is preferred somewhere down the track. Read all the fine print and ask the right questions...

motorway · 2 November 2008

Intrinsic time and heterogeneous markets
As explained in the book, Introduction to High Frequency Finance, the treatment of time in financial models is important for the success of the models. Over the past few years, the Olsen team has explored different ways for defining intrinsic time. We propose to investigate in more detail a concept of intrinsic time that is based on turning points of price moves. The thresholds of these turning points are a free parameter.

We propose to introduce a novel approach to defining volatility based on (this) intrinsic time ( P&F). The standard definition of volatility has the serious drawback that the return measurements are defined by clock time. For financial time series which exhibit clustering of volatility at different time scales, the measurement in clock time generates spurious results. The approach of defining volatility in reference to two intrinsic time scales offers new insights and a potential break through in volatility modeling.
----

In financial markets, the flow of time is discontinuous: over weekends trading comes
to a standstill or, inversely, at news announcements there are spurts of market activity.
The confinement of analysing returns as observed in physical time is overly
restrictive. (This? what about 100 year+ figure charting) is a first attempt at establishing a new paradigm by looking beyond
such constraints within financial data, constituting an event-driven approach, where patterns emerge for successions of events at different magnitudes.

This alternative approach defines an activity-based time-scale called intrinsic time.
Extending this event-driven paradigm further enables us to observe new, stable patterns
of scaling and reduces the level of complexity of real-world time series.

In detail, the fixed event thresholds of different sizes define focal points, blurring out irrelevant details of the price evolution.

The price curve is dissected into so-called directional change
and overshoot sections. ( He proposes a number of relationship laws ; of DC to OS )

Richard Olsen

An event in time is a collection of many smaller moments coalesced into a measure. It is composed of factors, facts, contexts, scope, details and duration. An event begins, an event ends, but its true measure is not that simple, nor should it be; time is not to be caught and cleaned on a hook like a fish, nor is an event in time just a sequence of moments with a beginning and end.

Jeremy Hight

Every Reversal = an EVENT. OF Intrinsic Time

When do events occur ? When the "time is right"

Three words among a few..... A juncture of Exhaustion , Crystallization
and Generation ...

Events (together) do the work that create effects...

eg When does a concert start ?
at 6.00 or when performer and audience come together in a juncture / event , ( unconscious ) agreement ?

When do the events on the P&F chart occur
at 10.15 & then 11.30

Or when

composed of factors, facts, contexts, scope, details and duration. An event begins, an event ends, but its true measure is not that simple, nor should it be

Something is Exhausted, Crystallized
and Generated...

Through a series of iterations of a making of repetitions..
an ongoing dialectic

thesis /antithesis
assertion/reassertion
information/equivocation

etc

support/resistance demand/supply

HOPE & FEAR

All these things are the one thing that draws the columns

( Wyckoff's Composite Man the CM )

Of

fixed event thresholds of different sizes defining focal points and blurring out irrelevant details of the price evolution.

This observation of Richard Olsen very much relates to the why and when ( to use ) of different reversal amounts...

The initial market reaction to an event is followed by a series of secondary reactions in which participants react to each other's reactions. "These after-effects are like the ripples on a lake after a stone has been thrown into the water," comments CEO Richard Olsen.... It is possible to predict how the ripples will pass through the lake and cause secondary reactions."

Important Point the surface of the markets is never still
so there is no beginning or end , unless a meaningful filter is being used
That is defined by the event sequence itself.....

volatility ratios = EVENT ratios , of different reversals ( Directional change filters )

P&F from very early used a filter
and different reversal and/or box sizes.

1% x 1
2% x 1

the 2% chart is containing the action
and defining the event horizon that matters atm

charts with the earlier mentioned trend outlines ( Ms & Ws )

The events that matter unfold in their ( own ) intrinsic time
When this time, this ROC , changes

Then waves are building up or down ... (changing event ratios across different magnitudes )

Work ( esp horizontal congestion) =The transfer of future Risk & Reward

How much work is seen in the width

- to exhaust , crystallize & generate

Accumulation & Distribution

trading ranges

Fear despair / adoration Hope

Swings

a series of iterations of a making of repetitions..
an ongoing dialectic

which when resolved , When the time is ripe

forced moves of a dynamic unfolded

motorway

motorway · 22 November 2008

motorway said:
Again is this chart Random ?
motorway
ps some consider this market the one to watch for early indications

China, Not So Risky After All?
This post is from Michael Yoshikami, President and Chief Investment Strategist of YCMNET Advisors, a wealth management firm:

In times like these, safety takes on a whole new meaning and risk is redefined on a daily basis. China, that emerging economy with so much promise, has often been criticized as a bubble waiting to burst. Well, it turns out that the United States, Europe, Australia and the entire global economy was in the same bubble bath.

Hear that? It's the sound of the plug being pulled from the tub, bubbles bursting and whatever that remains, going down the drain. Suddenly, China doesn't seem so scary anymore.

Hey what’s a 50 or 70 percent drop among friends? We're not just experiencing a bear market, we're at the start of a global recession. Perhaps it's time to give China a second look. After all, the first asset to deflate is often the first asset to recover.

China's Shanghai Composite Index is down over 60 percent year-to-date --a bitter loss for investors that bought in at the high. But now, considering the difficult circumstances facing the rest of the world, China presents some very compelling investment opportunities.

Valuations haven't been this low in ages. China appears to be one of the most discounted markets in the world. Sure, China will have slower growth. And no doubt, there'll be less consumption from countries that import Chinese goods.

Still, the fear might just be overdone. The downturn we are seeing is cyclical, not structural. I mean really, if your growth rate goes from 9 percent to 5.5 percent, it's a matter of deciding if the glass is half full or half empty. 5.5 percent isn't too sluggish on a real world basis. Just ask any industrialized economy whether they would like a growth rate of 5.5 percent?!

The government has committed 7 percent of gross domestic product to be invested into the economy to help stimulate growth. Many of these projects are core infrastructure build-outs that will benefit China in the long term.

The stimulus package is three times greater than the United States' TARP plan. And with oil prices going from $140 a barrel to $50 a barrel, this is the perfect tailwind for an economy that imports massive amounts of energy. Similarly, the cost of other commodities have plummeted, all of which, provide China with increased profitability margins.

I was in Beijing three weeks ago and spent some time with a member of China’s monetary agency. He said that China was committed to taking aggressive action, not merely symbolic steps.

A week later, China announced the 7 percent stimulus package. With a huge amount of funds on reserve, the Chinese government has the ability to continue taking additional significant and dramatic action to bolster their economy.

Oh, to have that cash in the bank. China's got it.

China has definitely taken a major hit. But for courageous investors, this spells opportunity on a silver platter. Remember, the key to investing is to buy when significant corrections occur that overshoot reasonable valuations. Risk is defined by fluctuation.
Check out China. It might just be safer than you think.

...

Reversal Formations

Can you have a bottom ( or top ) without a reversal formation on a P&F chart ?

Do all objective (45degree) Diagonals eventually get negated ?

1 box chart---Type of Fulcrum ( named by Wheelan as a Duplex Horizontal )

= indicative of a Fear, a fear of missing out .. ( so far )

Swings narrowed, Thrusts Shortened
breaking of Diagonal ( will happen first on the 1 box, 3 box to confirm )
congestion at the "catapult " can lead to vigorous move ( absorption )

All box sizes and types + reversals will have the action conforming to different
diagonals ) subjective + objective...

Which one is real ?

When you understand that all the various charts are moving at their own adaptive speeds , Which also means the charts can stop...Then it is understood that all charts conform to the real behavior ( again intrinsic time , unfolding of events ) and all diagonals are real..

3 box chart..........one of a very few upside vertical counts generated since the "top" and very likely activated ( will be the first )----> Which will make the break of the diagonal profound ( instead of ostensible-------a mere appearance ostentatious etc )

If all charts are real , which box size to look at and when ?

Allow the event volatility to determine-( the unfolding events themselves their , ROC )
= The speed of reversals ( intrinsic time ) + in ( Olsen's terms ) compare the
lookback ( the reversal ) with the overshoot ( the column length that is in excess of the reversal )

eg. Ask How is this chart different to a chart if the instrument were a fair coin toss ( probability of runs )

A dead centre means something on a non random chart

what fuels a bull market ?
premature selling !

what fuels a bear market ?
premature Buying !

overbought and oversold
potentially result.

But also delayed endings (same things )

The P&F chart does not have to move
and never sideways
it could arrive and stop
or it can fluctuate
45 degree angles

work or it's absence
=different dynamics.
Also importance of position ( coming or going )

motorway

when significant corrections occur that overshoot reasonable valuations. Risk is defined by fluctuation ( then so is reward )

What is valuation ?

https://www.aussiestockforums.com/forums/showthread.php?p=363085&highlight=P&F#post363085

James_Grenfell · 22 November 2008

I'm a charting agnostic - I don't "Not believe" but I don't "believe" either. Charts have an underlying assumption of past data pointing the way to the future. They ignore the importance of the "herd instinct" (or the psychology of the marketplace) in market behaviour and the law of the situation (in which each period of the market has its own parameters, many of which are not formulaic).

When we look at charts and tables we are looking at a selection of past factors and past results which must always contain certain redundancies and which cannot be said to reflect all possible past, current and future information. If you want to change a chart simply change the time period in which you calculate the results or the returns.

Still charts present interesting directions that might possibly point to potential directions (but they do not reflect known future events or directions).

Wysiwyg · 22 November 2008

James_Grenfell said:
They ignore the importance of the "herd instinct" (or the psychology of the marketplace) in market behaviour and the law of the situation (in which each period of the market has its own parameters, many of which are not formulaic).

I beg to differ and suggest charts are a direct reflection of an individual or groups action (evolved from thought) at any given moment.

Evidence shows that charts are no guarantee of future direction but a likelyhood of events can be procured from the market psychology reflected in a chart.

The Edge · 23 November 2008

Saturday 21 November 2008

Agnostic indeed!

"...a person who denies or doubts the possibility
of ultimate knowledge in some area of study."

> I'm a charting agnostic - I don't "Not believe"
> but I don't "believe" either. Charts have an
> underlying assumption of past data pointing
> the way to the future. They ignore the
> importance of the "herd instinct" (or the
> psychology of the marketplace) in market
> behaviour and the law of the situation (in which
> each period of the market has its own
> parameters, many of which are not formulaic).

For one who doubts, you certainly have some
specific opinions, [of questionable authority] and
which seem to be of the ego.

> They ignore the importance of the "herd instinct"

Charts are a depiction of what transpired. That
would include the "herd instinct" activity, as well as
the "psychology of the marketplace."

Your assertions makes no sense.

> When we look at charts and tables we are looking
> at a selection of past factors and past results which
> must always contain certain redundancies and which
> cannot be said to reflect all possible past, current
> and future information. If you want to change a chart
> simply change the time period in which you calculate
> the results or the returns.

???

> When we look at charts...

Who is "we," for certainly it does not include me in your
little scheme?! For whom else do you speak?

> must always contain certain redundancies

Redundancies? Like what?

Always?

If charts must "always contain certain redundancies,"
the following is an illogical conclusion:

> and which cannot be said to reflect all possible
> past...information

Then which "redundancies" were excluded? Does
not "always" mean without exception?

A chart reflects ALL possible information that went
into any decision-making, for ALL of whom took action
based on their decision(s). Anything not included in
the decision-making process would be irrelevant to the
chart and not a factor for consideration.

> ...current...information

Ditto.

Actually, once current information is recorded onto a
chart, it becomes past automatically.

> ...and future information.

So, you are an agnostic who does not believe, but
still holds confusing opinions AND knows the future?

> Still charts present interesting directions that might
> possibly point to potential directions (but they do
> not reflect known future events or directions).

How could any chart "reflect known future events or
directions?"

Further, how could those same future events or
directions be "known" ahead of time?

I don't know. Maybe it is just me?

Instead of presenting yourself as an agnostic, with
knowing views, [a contradiction], why not present
yourself as you really are, confused?

At least about charts.

motorway · 5 December 2008

When fractal analysis is being done, it always rests on some type of fractal dimension. There are many types of fractal dimension or DF, but all can be condensed into one category - they are measures of complexity.

In fractal analysis, complexity is a change in detail with change in scale.

OK a move = so many boxes & so many reversals
When we halve the box size ( scale ) what changes ?

In general, we deduce the scaling rule or fractal dimension, DF, from knowing how something scales. Formally, this idea is about the relationship between N, the number of pieces and ε, the scale used to get the new pieces.

You may know with great certainty that whenever you have changed the magnification at which you were viewing something, the number of pieces always stayed the same and that only the size changed. But ask yourself this - did the detail change? Detail is what we mean when we say the number of pieces.

If the instrument is a fair coin toss..changing the scale never alters detail

runs of Hs & Ts have a given probability distribution
in so many flips there will be so many runs of Hs & Ts etc

If the instrument is a coin with a memory acting on different scales then there
is a composite man, there are waves of followings.

There is support and resistance
Accumulation and Distribution
real information
non random
trends

Then counting boxes is more than useful information
( unlike at a true roulette wheel )

A DF is, in essence, a scaling rule comparing how a pattern's detail changes with the scale at which it is considered - this is what we mean by complexity.

Support and Resistance is in a tape reading/P&F view

Just resistance.... A column reverses when resistance to it's movement is met
old resistance , last points of support & supply are only just that..

When a column changes direction = it is a disturbance. something is met
a resistance .

Wide or narrow
active or dull
exhaustion
generation
life cycle

When does a P&F look like a plane
When does a P&F look like a line
it does not have to be either
it can resolve to a point

persistence and anti-persistence
trending and mean reverting..

some charts

the charts trend because the boxes have memory
they congest because of the same reason
and because information disperses from the few to the many ( where it become
dis information ) When the columns reverse what is being met ?

The blue arrow on the S&P in 2003 is pointing to the dullness ( months 4&5 )
Not only the two lines... Since I last posted this chart ( XAO thread ) there is a low pole formed....

Shanghai --- note the matching stepping stone counts.... Is it time ?
It is a duplex horizontal fulcrum ( just need the break out )

Supply overcoming Demand------------------> leads to Supply in some way meeting demand ( various shapes ) This is the Fulcrum----------------->
leads to ?

motorway

motorway · 5 December 2008

Because we have a real chart of fractals
( and nothing else )

The use of moving averages / regression lines etc
can have a logic
1 column = a disturbance
2 column = response
3 column = makes up a four point thrust pattern
4 columns = are the W & Ms

5 column is a thrust pattern and a min required to contain both a W & M
overlapped

etc

20 columns is 4 thrust patterns

How different to time based chart ??????

( moving averages on P&F were at least a consideration
as long back as the 1930's )

We have nothing else because the next column is not automatically a give
it must be generated

4 columns could form in 4 days or 4 weeks or even 6 and a half months
( Or NEVER )

So a 4 column moving average
could be a 4 day average or a 6 and a half month average
or anything at all-- what ever it should be

various structures have been given names
over the years

motorway

motorway · 5 December 2008

I'm a charting agnostic - I don't "Not believe" but I don't "believe" either. Charts have an underlying assumption of past data pointing the way to the future. They ignore the importance of the "herd instinct" (or the psychology of the marketplace) in market behaviour and the law of the situation (in which each period of the market has its own parameters, many of which are not formulaic).

When we look at charts and tables we are looking at a selection of past factors and past results which must always contain certain redundancies and which cannot be said to reflect all possible past, current and future information. If you want to change a chart simply change the time period in which you calculate the results or the returns.

Still charts present interesting directions that might possibly point to potential directions (but they do not reflect known future events or directions

The "Method" takes for granted:

That the price of a stock at any given time is correct up to the instant of the last purchase and sale (a) by the consensus of all buyers and sellers in the world and (b) by the verdict of all of the forces governing the laws of supply and demand. (what forces ? how many forces ? ALL that matter)

That the price of a stock reflects or crystallizes everything known about or bearing on from the first sale on the Exchange (or Prior) up to the present time.

That those who know more about it than the observer cannot conceal their future intentions regarding it. Their plans will be revealed in time by the stock's subsequent action.
( markup is of no use unless you accumulate first/ mark down is of no use unless you distribute first .. off who and when and where ( on the chart ) does this take place ?

Victor De Villiers, "The Point and Figure Method of Anticipating Stock Price Movements", Published 1933, pg 8

"must always contain certain redundancies ( use a filter to remove redundancies ) and which cannot be said to reflect all possible past, current and future information. ( can reflect all of this to the extent that someone knows and acts ) If you want to change a chart simply change the time period in which you calculate the results or the returns. ( The biggest redundancy is tIME Filter it out and only leave Time...

After a bottom all stocks might have trading ranges of equal lengths of time , But you don't measure a trading range by time but by the amount of trading )

Charts have an underlying assumption

---> That one must act first by buying or selling- in order to sell or buy or profit in some way later"

This is the study of the technical position
of demand and supply
the flow of information
of sentiment...

Of a building of potential
Of the release of that potential
and then the decay

demand or supply exhausts
information diffuses -->along a 45 degree angle ( why ? )
sentiment subsides
complexes of an emotional tone & image
wax and wane

Bear Market , Bull market , Commodities , TECH
OIL,
are themes ---> feeling tone complexes --> images that capture and entrap but also (can )reward...

why use time charts at all then ?
Very good reason
effort is expended at a particular time ( moment )
while a cause is built over and through time

the vertical Vs the horizontal
bars vs rows

motorway

motorway · 20 December 2008

Wave: Intraday, Minor, Intermediate, Long term, Fluctuations that build-up & build-down and form trends.

You may know with great certainty that whenever you have changed the magnification at which you were viewing something, the number of pieces always stayed the same and that only the size changed. But ask yourself this - did the detail change? Detail is what we mean when we say the number of pieces.

By studying the relationships between
these upward and downward waves, their duration, speed and extent,
and comparing them with each other, we are able to judge the
relative strength of the bulls and the bears as the price movement
progresses.

As a result of this ceaseless struggle between bulls and bears, the
market eventually reaches a position in its broader swings where
these professional operators will uncover vital weakness or
strength. When such a critical condition is reached, the crisis is
usually revealed by significant developments in a comparatively
short series (few days) of small buying and selling waves. Thus,
when a period of accumulation is about completed, a study of the
small waves of the market will usually disclose the growing scarcity
of offerings which precedes the active marking up stage. Or, when a
period of distribution is about ended, a study of the small buying
and selling waves will usually reveal the imminence of the active
marking down phase.

How far does a pendulum swing ?
What is the relationship between the swing down and the swing up ?

Two types of volatility

The number of reversals
The length of columns

These charts will reveal
when the "waves" build down (RDW)
and we should follow the action down to 50pt 25pt 10pt
even 5pt charts

In fractal analysis, complexity is a change in detail with change in scale.

complexity is meaningfull change in detail not just size ( number of boxes )

We can objectively KNOW because we can count
and compare change in size to change in detail..

Question where is resistance ?

some ingredients

Distance , velocity & acceleration of swings
is number one ( resistance is always being met )

Old highs and lows .. but the amount of work diminishes their influence
so the diagonal line and not so much the horizontal ( work does things , not time it just passes)

Congestion zones ..very important here horizontal is relevant.

2% x 1
1% x 1
&
50Pt x 1

We can use various ways to scale a chart
eg standard deviation

I think the best way is to let the chart objectively scale itself

complexity is a change in detail with change in scale
Detail Here = changing relationship between the horizontal and the vertical
In Charles Dows statement....The creating of diagonals
In Wyckoff's --- causes and effects

motorway

motorway · 20 December 2008

This is the largest Congestion Zone
ever seen on the S&P500 dyor

ie if this is a base it is the largest base ever built..

( It is work that lays a foundation
not time passing and twiddling thumbs.
MOVES COMPLETE .... TIME JUST TICKS
clock time is predictable but useless for forecasting
intrinsic time is not predictable but can be used to forecast)

The spike down is a very positive sign
= absence of any(?) supply at those level

prices always(?) fall below the point of accumulation
prices always(?) rise above the point of distribution
quote from 1898

motorway

tech/a · 20 December 2008

M/W I notice the massive amount of effort both horizontal and vertical in your XAO charts at the 4300 area.

motorway · 20 December 2008

tech/a said:
M/W I notice the massive amount of effort both horizontal and vertical in your XAO charts at the 4300 area.

Yes , very powerful forces

There is high volatility in the lengths of columns and the number of reversals
The chart is two dimensional = a mean reverting process , a very dynamic one

So the mkt is wide and fast

and there is no point looking at smaller box sizes ( the detail esp in terms of reversals does not increase unlike now )

The last accumulation will be done in a dull and narrow mkt
We have trends because "events" have memory
With such destruction we do not expect to see a stop and reverse
What we will see is an end to supply
and then ( even if it is well above the low point )
a very dull period.

Remember the first fall in August 2007 ?
People saw that as a buying opportunity
mkts just go up--memory

We could say that a normal bear mkt
has been compounded by the huge credit seize
hence what maybe could have been a bottom
was never going to be a bottom

IF a P&F chart is not clear
Condense the action further
eg move to a 3 box reversal chart

large mean reverting structures
are where the work gets done

The work of creating a value zone
or a no-value zone..

To buy (or sell ) near these structures is
what is meant to buy low and sell high

In P&F it is how to define potential oversold or overbought

Active or Dull
is as important as patterns of congestion

eg a 25pt x 1 chart even with EOD data
is meaningful atm

Pattern is about ascending or descending
tops or bottoms

here is the 2% chart as a 3 reversal
We can look left at old support
We can see that Dec is only three boxes down ( becoming dull )

Compare with the earlier congestion
the descending tops too...

Also see how the mkt went above
the point of distribution ( memory + leverage )

It will go ( Has gone ? ) lower than the point of accumulation
same reasons esp leverage

Usually the months will crowd together
at least two
at the start of a bull mkt

narrow and dull

A Sneaking Bull
born in gloom

The swings of a pendulum
are forced moves
A strong move means strong moves

You can not force a dead centre

The swings of the mkt have memory
a Bull mkt has to begin in gloom and end in glory
People have to be in at the top and out at the bottom
Borrowed to the hilt etc

Just different ways of saying the same thing
tautologies

Your experience with market profile
should give you a good understanding
of what a congestion zone is
and what things like pole reversals reveal

With P&F it unfolds in it's own time
So active and dull
are very important

In modern exponents this
seems forgotten.

My opinion prove disprove etc
Bottom is in
small cap growth ( revealed by low gearing )
to out perform
dyor

Its 1974 My Opinion

Blue line also defines a "zone of fear"
Dullness and SOS to watch for +
reversal formations

motorway

motorway · 20 December 2008

Think

If you were charting a sequence of coin tosses
( and did not know it )

When you reduce the box size
The number of reversals would not change
Only the columns would become longer

eg half the box size ( so your box size is half a coin toss )
The columns become twice as long

But the reversals stay the same..

When you increase the box size ( so you condense two tosses to one )

Both reversals and the length of columns reduce in the same proportion.

In both cases there is no increase in detail
in the first there is a loss

There are no waves here
None that can build up or down

No accumulation No Distribution
No forced moves

No---flow of information
No diagonals

25pt X 1 chart

Too simple but
what (who?) creates the reversal volatility--events --information ?
who creates the length of column volatility - followings -emotion ?

What makes a trading range ?

what is here atm ?
Information and less emotion.

motorway

motorway · 27 December 2008

Box counting is a way of sampling an image to find the rate of change in complexity with scale, as well as measures of heterogeneity or lacunarity.

The basic procedure is to systematically lay a series of grids of decreasing calibre (the boxes) and counting the number of Boxes for each successive calibre. Counting is how many of the boxes in each grid had any part of the detail in them. (The important detail here is the Xs, the "unimportant" the grey background).

Heterogeneity or "lacunarity" literally refers to a gap or pool ( The unfilled spaces in the patterns )

Market Heterogeneity means that the impact of an event does not play out immediately in the market, but slowly dissipates at different rates . The initial reaction to an event is followed by series of secondary reactions (aftershocks)

Market participants are different. To anticipate disconnects between buyers and sellers (discontinuities in liquidity and, therefore, pricing), the likely responses of these different players to price changes and other events must be analyzed discretely.

Some quotes from the general literature on fractals
last two from Richard Olsen

Point- You can read Mandelbrot & Peters etc and you read some interesting theory without any application....In fact some suggestive dead ends (imho )
With Olsen You do get some good suggestive pointers to application ( very good insights )

And , then ? There is P&F

10 pt x 3 XAO chart

The chart scales itself (It builds down)

Every trade leaves a footprint; managing risk is about reading this path.

Pricing flows originate in momentary micro-bursts of volatility that kill liquidity and displace pricing.

The better you can gauge this displacement, the smarter your next positions.

This quote from Richard Olsen

compare to Richard Wyckoff

Bear in mind that a decisive price movement cannot be expected to
occur until there is evidence that the forces of supply or demand
have been built up, and then become unbalanced, sufficiently to
generate a sustained swing.
Therefore, take care to analyze the
behavior of an average or a stock while it is forming these
congestion areas to make sure that such formations actually do
signify accumulation or distribution.

A W Cohen gave this possible formation the name of

A Bearish Signal Reversed
"The first six columns of this formation display the classic pattern of
lower tops Although it starts out looking exactly
like a Bearish formation, an unexpected price reversal takes
place in the seventh column. The buy signal is given when the first
prior top is penetrated. According to A. W. Cohen the momentum of this straight upward reversal in the seventh
column usually carries far enough to yield a substantial profit.

There is an expectation that the force of selling which is producing persistently lower highs will complete a rout of the buyers at some point. But when the bearish signal suddenly reverses, it has all the hallmarks of a bear squeeze. A.W. Cohen found this to be one of the most reliable point & figure chart formations. A properly constituted bearish signal reversed has at least 7columns."

XAO is in the 7th column ( an up column )
A W Cohen founded Chartcraft
(P&F as a trading system double tops etc )

Bear in mind that a decisive price movement cannot be expected to
occur until there is evidence that the forces of supply or demand
have been built up, and then become unbalanced, sufficiently to
generate a sustained swing. RDW

The trading behavior of diverse market participants assumes characteristic patterns. Olsen

Conventional (clock time imo ) analysis is too coarse-grained to reveal anything other than large-scale trends that are speculative and unreliable. Olsen

Because

"inasmuch as....you ...understand the market. You will think in waves."

Only For Discussion and interest

This pattern will resolve and reveal
in it's own time

But this pattern also has a context and position
and also gives context
eg to the "long tail" ( chartcraft)

corrected spike with absence of "work" at the bottom ( pre chartcraft )

motorway

motorway · 4 January 2009

So is anyone interested ?

If not

What happens ( the Xs) and what does not happen ( the white spaces )

reveal the demand and supply dynamics

and inform us how to scale the chart

OK

There is position ( in terms of the geometry ---How far )

There is velocity ( how fast )

and then there is acceleration ( rate of change of how fast )

velocity in a sense is Kinetic energy
acceleration is in a sense potential energy

how so ?
If we throw a ball into the air
as it reaches the top

What is velocity and acceleration doing ?

and why is it doing it ?

HOPE ( think of what hope does-- Tops tend to be a process )

If we throw a ball over a cliff

What is velocity and acceleration doing ?
Just before the splat !

FEAR ( what does fear do.... Bottoms tend to be an EVENT-- that is The Bottom the actual tic )

Trend lines measure velocity and acceleration

The 45 degree lines are Objective Forecasting lines

the lines drawn from pivotal points
are Natural trend lines ( much more appropriate term than subjective imo )

The case for The Bottom is (imvho ) much stronger..

empty spaces
inform us that forces
of a larger scale
are active and impacting on the scale we are observing

Also to be considered are velocity and acceleration in terms of

Active and Dull ( seperate often overlooked subject )

So a XAO chart

with some classic
trendlines

Note the empty spaces ( air pockets ) at the top
Note the tight formation current

P&F is a wonderful study (imo)

It is very wrong to think it is a derformed bar chart

( chart of only price disregarding time and volume )

And ( truely ) We ( I) have only scractched the surface here !

motorway

tech/a · 4 January 2009

M/W

What are the numbers on the chart and the Bars to the right.
What part do they play in your analysis?
It appears with the 45 degree lines that we are at an important point now?
Why have you labelled it 1

Point & Figure Charting - secret weapon?

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