Point & Figure Charting - secret weapon?

[motorway]

Good stuff Motorway; yes, Olsen's videos are almost a text on PF charts! Thanks a lot for the link to those.

Nothing beats the move based.
Bruno Dupire

· Is there an answer? (yes) Digitalize the financial system !
Richard Olsen

Example: trend scaling law
trend of 1% will on average continue for another 1%,
trend of 2% for another 2%.
Scaling laws establish definite frame of reference for financial modelling.

Directional Change = Box Size
Over shoot = movement in excess of Box Size

Richard Olsen's Trend Scaling Law ( one of 17 ) ( is like an old P&F rule )
It states that when a reversal occurs "on average" a further move = to the reversal amount will continue before another reversal back to the original direction...

So what becomes important ?

Any divergence

eg The one BOX step BACK
or A THREE BOX REVERSAL

As you suggest Timmy
Olsen
Dupire
Mandelbrot
etc
have all written P&F texts
whether they Know it or NOT...


Some slides from Dupire

Which converges to reality ? Moved base ( P&F) or time based ?-->
= distraction & oblivion= Distortion of the PRICE CURVE

Financial markets are fractal : statistical properties are self similar.
When we remove Time Frames.

See the price Curves below ?
See how sampling in tIme
removes us far from those REAL PRICE CURVES ?

conventional time series analysis, focusing exclusively on a time series of regularly spaced observations, is far removed from both the fractal viewpoint and the real nature of the raw data

time = Duration is IS important
Volume = effort is important
and PRICE the actual PRICE CURVE is Important

and Intrinsic Time ?

It Eats Things

Motorway

 

[ThingyMajiggy]

hey guys,

I've attached(thats right! ATTACHED, iT WORKED!!!) a PF chart of the ES, its a 0.25x3 chart, now could someone put their interpretation on it, for example, would you look at this the same as a bar chart in the fact that, the...erm.."column" that is highlighted with my vertical line on the attachment, is that the PF version of demand drying up, is the volume still relative...or AS relative maybe as a bar chart? and things like points 06:11-06:33 on the chart, that is resistance? the 4 points, 4 green X's, then the breakout, I'm trying to interpret how to ACTUALLY trade off this method, its weird following pure price movement, after watching time based charts.

I insist on mastering this PF method, I haven't touched it for ages, I've been flat out with work, but hope to learn more about it more. Its fascinating!

 

[motorway]

Hi Sam

Good to see some charts

I will certainly make some comments

It would be good to see a one box reversal chart too

Maybe a .50 X 1 ( seeing .25 is the min bid )

esp with the Sort of trading you are doing

That way we can coordinate between the two charts
and 1 box reversal will give us more detail of the dynamics of the tops and bottoms...

The three reversal chart really connects the areas of congestion.. This is very important..

Motorway

 

[ThingyMajiggy]

Hi Sam

Good to see some charts

I will certainly make some comments

It would be good to see a one box reversal chart too

Maybe a .50 X 1 ( seeing .25 is the min bid )

esp with the Sort of trading you are doing

That way we can coordinate between the two charts
and 1 box reversal will give us more detail of the dynamics of the tops and bottoms...

The three reversal chart really connects the areas of congestion.. This is very important..

Motorway

great motorway, was hoping you would turn up

Ok here is an attached chart of the 0.50x1(its a diff colour, didn't have my template on the first one). it shows more detail, so the top that I was questioning, on this chart show nothing volume wise, right on the top there @1109.50, does this mean no interest there? hence why its drifted off?

 

[motorway]

Might take a while

Lets Start

Ok We know what a P&F chart is How it moves etc ( important )
We know that it is a picture of the action of the price coastline and is the dynamic of that coastline ( Watched live you would know what I mean..It stops starts speed up slows down as it meets resistance )

Ok .5 x 1 This is a Box size of 1/2 a point with a reversal of one
Price has a certain probability of being in a BOX and moving out of a BOX

That the mathematical laws governing the Unit Chart (P&F ) are Independent of the Size of The Unit adopted
~ 1926

An Event Driven Chart Which moves when demand and supply moves it .

Every Column of more than TWO BOXES is a TREND
When RESISTANCE IS MET The trend ENDS
IT will SLOW STOP and REVERSE FORMING a NEW COLUMN That will move in the oposite direction , in this case DOWN until SUPPORT IS MET etc

Up and down ALTERNATE as Demand and Supply assert inturn and reassert.

So Every column is testing of demand and supply
Every column is responding to demand and supply

We can see at a glance that some columns are longer than others
They make more Ground and Give BACK less GROUND ( or more )

So each column is a test and response
makes Bullish and bearish statements
not only in the static aspects a frozen Coastline of past battles. But also in the dynamic aspects Of HOW LONG and HOW FAST

and YES there is VOLUME --> Volume is activity.. participation EFFORT.

Price as Range is MOVEMENT

And TIME on the chart is SPEED and DURATION

OK

On the chart I have put some ( natural ) trendlines more later on these..
Now We don't have to draw them But we should think in terms of them for context ..

What Statements is Price making as We move from left to right ?

Trend is DOWN there is only One Green Column with TWO green Boxes

A TEST what is the response ?
Weakness

With a one box reversal chart We Would expect to see TWO BOXES in the same Direction in each column ( ON AVERAGE )
When we see a THREE BOX REVERSAL or A ONE BOX STEP BACK ( when we see a O & X in the same column )... We have Divergence , A Point of Interest to watch carefully for response ..

There are weak moves upwards . Just Step backs ( A step back against the trend VERY IMPORTANT POINTERS .. The OTHER SIDE IS THERE but makes no ground )
SEE the column with a X over Three red Os ?
That column and the one before ( test<--> response )

Make a very BEARISH PATTERN
We also see some Volume coming in
So We expect IF that is SUPPLY
There should be accelleration DOWN

Instead we get FOUR STEP BACK COLUMNS

( There are not TWO BOXES IN THE SAME DIRECTION )

THE ACTION NARROWS ( WE SHOULD EXPECT FROM THIS POINT A GOOD MOVE)

Which way from here ?

VOLUME COMES IN and We get just not TWO BOXES in the same Direction BUT FOUR.

The TRENDLINE is BROKEN ( WHAT BROKE IT ? Not TIME. But DEMAND It is a P&F CHART )

Ok After a move up We want to see IF SUPPLY comes in
and whatever Supply does come in We look to SEE if it is ABSORBED

A Stair Step Pattern FORMS
one of three accumulation patterns ( on the way down , In a Range , on the way up )

WHEELAN gave it a name does not matter ( Nine such names )

of DUPLEX HORIZONTAL...

And we should EXPECT ?

more later if you want..

POINTS

TESTs AND RESPONSEs

Importance of THREE BOX REVERSALS and ONE BOX STEP BACKS

How Each COLUMN makes a statement about DEMAND AND SUPPLY
IS Demand and Supply

How Each column is an assertion which is seen as a test which the next column responds to:

It negates ,Rejects or affirms
and Then the next column will then reassert.

That SUPPORT AND RESISTANCE ARE ALWAYS MET ( That is what draws the columns )
We can see Demand-->
When the stride down lessons
When the stride down SLOWS
When the action moves sideways ( IT IS NOT TIME )
and TAKES the FLUCTUATIONS through the trend line..

We do not have to WAIT FOR BREAKOUTS to see DEMAND


Supply overcomes Demand
Supply meets Demand
( EQUILIBRIUM REGAINED )
DEMAND IS SEEN to OVERCOME SUPPLY

REVERSAL

NOW .
True Trend is the fluctuations themselves ( more latter )
Trend lines are only context which action may conform to

But again only demand and supply can break such a trend line

( There is also the movement along 45 degrees one of those

mathematical laws ~ 1926

..

OK if positive feedback I will continue
The best way to learn P&F is to watch the chart flow across the screen
It is like having DEMAND AND SUPPLY on your very finger tips ..

Motorway

 

[Whiskers]

I insist on mastering this PF method...

I said that too.

Still trying!

 

[motorway]

I said that too.

Still trying!

Whiskers THERE IS NOTHING SIMPLER THAN P&F..

It is just two sides continually Pushing against each other other.

In BROKEN RHYTHMS , With players continually changing sides as EXPECATIONS
are formed--- And That is CAUSE AND EFFECT

SO far WE looked at The CHART from DEMAND AND SUPPLY

What do PRICES do when DEMAND oversomes SUPPLY ? When Supply oversomes DEMAND ? THE ONLY accurate REPRESENTATION of THAT is a chart in INTRINSCIC TIME eg a P&F CHART

THINK of a BOXING match you are only going to react to your opponent in fixed time units ... Your opponent is going to knock your head off through the GAPS with what seem like Broken Rhythms.

on The ACTION so far from Victor De Villiers -1934

DOWN TREND A PREREQUISITE TO FULCRUM FORMATION

The ideal full fulcrum develops after a down trend has been halted and the price path builds up a pattern which moves over in the trend channel from the lower trend line to the upper trend line as a result of a series of rallies and declines.

This action builds up a congestion area with a flat base. From this series of minor rallies and declines, two to five BOXES in extent, which halt within a limited range developing a flat base, a sharp quick rally occurs that may result either from short covering or actual buying which creates the sharp run-up because of the absence of offerings overhead.

This sharp advance is then usually followed by a temporary corrective decline which is arrested at a point above the low level established before the first run-up. Subsequent to the second series of rallies and declines, another sharp advance develops which must exceed the high point of the previous rally. The second high point, which is a full figure above the previous rally top, then becomes a catapult point.

Once the stock has developed sufficient strength to hurdle the catapult point, it usually and speedily develops a substantial advance to higher levels, and the reverse occurs when this formation appears near the top of an extended advance.



SUPPLY EQUALS DEMAND

The full fulcrum develops at the point where the center of gravity shows the balancing of the forces of supply and demand.

A down trend channel formed prior to the fulcrum point indicates that the supply of stock exceeds the demand.

At the fulcrum point, the forces begin to balance. After the first rally where the reaction holds above the previous base level, equilibrium is regained and a new up trend channel is in process of being established.

Here, demand begins to overcome supply, and a catapult point eventually develops. At the catapult point, demand has overcome supply, and the advance to substantially higher levels begins.

Simple Things often have great depth and are profound
So DOING is Best way of learning..

NOW Even INCREDIBLE CHARTS has P&F charting.. And There is always ( and good it is to ) PEN and PAPER

Charting a MUTI YEAR BULL MARKET or an INTRA DAY SESSION
INVOLVES THE SAME PRINCIPLES because we are in that intrinsic time that is real market time...

BECAUSE --->

That the mathematical laws governing the Unit Chart (P&F ) are Independent of the Size of The Unit adopted John Durand

Motorway

 

[inrodwetrust]

Here's a free e-book link of

THE POINT AND FIGURE METHOD
OF ANTICIPATING STOCK PRICE MOVEMENTS by Victor DeVilliers & Owen Taylor

updated with charts from Bulls Eye Broker. That might be worth a read. Covers the basics & some analysis of catapults & fulcrums.

http://book.pointandfigure.com

regards

just realised its the source of some of motoway's quotes...there you go then!.. hope you don't mind motoway

 

[ThingyMajiggy]

It also states in that book that this method ignores volume. Interesting.

THE METHOD IGNORES VOLUME

The Point and Figure Method entirely dispenses with the recording of the volume of sales. Many have felt this to be a distinct deficiency under the belief that volume is a dominant factor. We are unwilling to concede that volume is the vital influence which, in the final analysis, governs the price movement. It is conceded, however, that volume is an influence when used as an aid in other methods. In our opinion, the Point and Figure Method has proven itself so much more reliable, that we are satisfied from our research and experience to conclude that the number of price changes and the manner in which they combine themselves have a more scientific foundation than the influence of volume in the anticipation of price movements.

Keep going motorway, I think I'm still following

 

[ThingyMajiggy]

here is another one motorway, its a .5x1 chart of the SPI. the A B C D areas are parts I want you to describe if you can, the huge markup at A, what does this mean and how should it be interpreted? the 2 X tests on the push down at B, these would be good entries? price would slow on these X tiny up moves, momentum is down? and the narrowing price at C, and also the wide price action at D? especially D, why is it so wide and constantly like that?

thanks in advance

 

[motorway]

Ok A few points

hope you don't mind motoway

Not at all , A good find and contribution.

On Victor De villiers --> He was from a very early stage associated with Richard Wyckoff.... Often contributed to the Ticker and Investment Digest ( magazine of Wallstreet )... In 1919 Wyckoff Published his book Financial independence at fifty ...

he later seems to have be quite close and one of the Original "ASSOCIATES"

In Wyckoff and Associates inc. Which was Where the Wyckoff Courses were housed

They had a fall out over technique .. Victor became a pure P&F chartist and it is his idea it should never consider VOLUME....

He also tried to formalize principles into names
FULCRUM CATAPULT etc... Wyckoff felt giving names was death ! It fixed things too much .. Wyckoff would rather ask What is trying to be achieved with this congestion zone and go from there..

Victor's Book is a good one and is as close to Wyckoff as you are going to get
outside Wyckoff....

When he Broke with Wyckoff he originally published under his own name in 1933.... He then teamed up with OWEN TAYLOR and Published a Three Volume more expanded edition...

The Book inrodwetrust has linked to is VOLUME ONE....

Owen Taylor Would later join up with Alexander Wheelan ( whose book again is a good one )

The P&F world is a small ONE...

NOW if you look at chart examples through the 1920's you will see Volume
being used...

Take Wyckoff's comment from 1908

It seems hardly necessary to say that an up trend in any chart is indicated by consecutive higher tops and bottoms, like stairs going up, and the reverse by repeated steps toward a lower level.

A series of tops or bottoms at the same level shows resistance. A protracted zigzag within a short radius accompanied by very small volume means lifelessness, but with normal or abnormally large volume, accumulation or distribution is more or less evidenced. Here is a style of hand chart especially adapted to the study of volumes:

When made to cover a day's movements in a stock, this chart is particularly valuable in showing the quantity of stock at various levels. Figures represent the total 100 share lots at the respective fractions. Comparisons are ready made by adding the quantities horizontally. Many other suggestions may be derived from the study of this chart.

He would continue to develop this ...

It became His tool of choice for intra day trading and is the Subject of the 1932 TAPE READING COURSE...


We can see why Victor says No VOLUME and for the trading He is doing WYCKOFF did not use Volume with the Figure Chart Either..

The BOXES are adapting to all aspects of the Trading..
The BOXES are PRICE VOLUME & TIME..

SAM I can see you are getting IT

You are asking the RIGHT questions

POINT: We all should see HOW MUCH CLARITY THESE CHARTS HAVE !

YES SAM when the chart slows down and becomes DULL
How much meaning then when it becomes active AGAIN ?

OK THERE are NO TIME FRAMES on the P&F CHART ( = accurate superior map of volatility = ZERO LAG CHART = ABSOLUTE CLARITY )

But there are different TIME HORIZONS

and This esp on inrta day trading is when VOLUME can be so USEFUL

Volume is a pointer to PRICE being WRONG
VOLUME is a pointer that those with longer time HORIZONS are becoming involved are or leaving ( STRONG and WEAK hands )

Time Horizons Shrink and Expand
This is related to CAUSE and EFFECT

and VOLUME can be very useful pointer
It is about ACCUMULATION and DISTRIBUTION

Much to Say about your charts SAM

Will continue

Motorway

 

[motorway]

Think of a contest Where I have to push YOU backwards and You have to Push Me.

AND there is continuous betting on how much ground either of us will make against the other..

And also We are not adverse to taking bribes and waiting for the "MONEY TO GO ON"..

The P&F chart is a study in the FORCES ABOVE AND BELOW the current PRICES

THE P&F chart is a finely calibrated SCALE -- Which reveals the potency of those forces...

OK

The impact of events cannot be determined by measuring just the absolute price move, but has to take into account certain qualifying factors.

A straight price move--> an uncorrected column represents less impact than a corrected column of equal size occurring within the same time period.

A slow price move also has less impact than a faster move of the same magnitude.

Get this ?.. When we see a long unbroken column at your A . We ask where is the other side ? Is he really pushing ? or is he waiting for the "Money to go on" ?

Reactions against the TREND are NATURAL and HEALTHY...

We expect to see TWO BOXES on average in the same direction.. When We don't .. SOMETHING IS ON...

TEST RESPONSE... at your A price MOVES UP ,, An ASSERTION .. But SUPPLY immediately reverses the action---- THIS is VERY BEARISH

This is an UPTHRUST... or as SOME P&F terminology would call it a HIGH POLE.

IF I push You back and You are really seen to be trying
Then I am a GOOD THING

So a move up that shows consolidations and one stepbacks
IS a clear sign of strength ..

If I Push you back seemingly with ease
But you don't seem to be trying... Then We can not be sure till you show what you have got and you get off the sidelines..

A Swift move up like that IS a bullish sign
But We should see little ground given back...

Why should there be a 3 box reversal ?
or why should price react back more than 50% ? ( HIGH POLE )

On that chart after that BEARISH STATEMENT... Prices move UP
But look at the volume indication on the last Up column

This is a LAST point of SUPPLY
( Wyckoff ) There is a lack of demand

The action at A is a significant Sign of WEAKNESS
We know there WAS significant resistance at that point..

Even without looking at volume
We know we saw weakness

....

Just back to the early chart

I have marked TWO HOUR sections
DO you see HOW just the TIME ELEMENT
designates The TOP as an Important point from which
activity, when it comes will be revealing !

See also what I mean By Distraction and OBLIVION of TIME BASED charts

If We were using 5 min bars
This chart would look completely different

The P&F chart is an INTRINSIC TIME CHART
That Top on the P&F chart has it's due Width
as so all the phases of the action.

Increased Activity INDICATES an Early Move .. It is so important to watch for any increase in TEMPO of Price Change Activity .
Alexander Wheelan

..

It is not the P&F chart that deforms Time
But the Bar and Candle Charts.

Motorway

 

[ThingyMajiggy]

So a move up that shows consolidations and one stepbacks
IS a clear sign of strength ..

could you explain more about these one stepbacks?

this is fantastic motorway, keep going by all means.

The part about time is really interesting, that means on that chart you posted, price slowed right down on that top, then dropped off, so when price flow slows, its showing no momentum in that direction? like the pushing contest, its not trying?

I have attached the chart I posted, but with 2 hour blocks on it, price was relatively slow when we had the upthrust, then took off, accelerated on the big push down. interesting

keep it up motorway, learning alot.

 

[motorway]

On Time

Sophisticated mathematical tools are employed to identify the behaviour pattern of the market components and analyse their reaction patterns.

One of the key elements of these forecasting models is the concept of “intrinsic time”, that is, time is rescaled according to the impact of events on market volatility. With intrinsic time, periods of high volatility are expanded and thus are more important than periods of low volatility, which are compressed
Richard Olsen

Sophisticated math tools --> just substitute P&F chart

time is rescaled according to the impact of events on the market You really have to understand this This is why every box on the chart is Significant..
it is Why REVERSALS are called WORK and Why that 45 degree line is important and has special significance..

Olsen again ( he is a modern day P&F practitioner )

A price shock that lasts , for a brief period of time, has a very strong impact on market volatility. Then over a much longer period it has a very weak, but persistent market impact. This behaviour of dampening price shocks, but then a long persistence of weak after shocks, is a characteristic feature of market behaviour.

The market has memory,,, Now your High Pole is a PRICE SHOCK .. We look always left to it from that point.. Alex Wheelan

As price approaches such an area it is likely that there will again be supply encountered at that point. Therefore , it is often possible to buy on weakness at a price below this level on the first correction after a penetration of that resistance.. Price may move slow and congest as it approaches that point or it might accelerate and move past with no hesitation..

Ok ? so what happened ? We can see it happening ! We are watching the TAPE in intrinsic time...

Ok It proves to be an important juncture.. Now because it is not a eg candle chart but a P&F chart we look left YES .. But we also look along the 45 degree angle..

WHY is THIS THINK


Each box is a position maintained by demand and supply
Each box stays as long as there is demand or supply meeting. UNTIL one side is ABSORBED... The BOXES represent WORK ..

A BOX could form and if buyers and sellers keep trading a BOX could just sit there for a whole YEAR

THE CHART CAN STOP .. It does STOP while the WORK gets done and THEN it MOVES because the Work is being done again...

So as demand absorbs supply The chart moves characteristically on average along 45 degree angles slowing and pausing absorbing.. Then moving on.

Here we are talking about Cause and Effect

IT GOES up to build a CAUSE to go DOWN
and then it GOES down to build a cause to go up..

Two aspects TREND & TECHNICAL POSITON

Just look at that HIGH POLE ..

The 45 degree movement ( on average ) happens. Because it is a chart of demand and supply and not just a random process like a series of coin tosses..

SO when will the cascading

long persistence of weak after shocks,

cease..

when the energy is exhausted and when demand as absorbed all the supply that has been mobilized .. some where along that 45 degree line the action will change.. The Behavior will change..

SO

always look left
Think in terms of natural trendline
and in 45 degree forecasting lines

The thing about the 45 degree lines are that they are
100% OBJECTIVE
and they PROJECT FORWARD

RICHARD OLSEN

Since the inception of classical economics over two hundred years ago, one of the most sacred assumptions has been the hypothesis that an invisible hand determines market prices and that market prices follow a random walk. Today, there exists significant statistical evidence that this is not the case and we need to acknowledge that financial markets are, indeed, predictable. How is this possible?

RICHARD WYCKOFF

It seems to us, based on our experience, that Tape Reading is the defined science of determining from the tape the immediate trend of prices. It is a method of forecasting, from what appears on the tape now in the moment, what is likely to appear in the immediate future.

OK I am connecting OLSEN to the P&F literature
But that is how I find it -->CONNECTED

The 45 degree line is an Equivalent of the Wyckoff "COUNT"

Now if we are using a BOX size TOO small then we are bouncing around in the bid ask spread.. If the chart meanders sideways for a long time that is also indicative of something about the participants

All aspects of reading the chart should be co ordinated..

BUT
The ACTION happening always matters the MOST
EVERY BOX is support and resistance RIGHT NOW..

One step back ?
is where you change columns say from X to O and the next move is another X
you have an O under an X in the one column THERE WAS A STEP BACK BUT NO CHANGE IN TREND..

THERE WAS NO OVERSHOOT

Think of a pendulum it swings down but reverses at the bottom
STRANGE ? SIGNIFICANT ! Clear sign of a force at work

SAM Like explaining what a banana tastes like.. It is SIMPLE but because it is real There is lots to say

And if you keep practicing You will discover so much
But the right words at the right time can be MAGIC..

Motorway

 

[motorway]

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http://www.pointandfigure.com/BEB5.php

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The free Yahoo data source is activated by default, but you can also select other
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data.

Motorway

 

[tinhat]

I just started reading Richard Wyckoff's "The Richard D. Wyckoff Method of Trading and Investing in Stocks" on the weekend. If you google the title you will find it as a pdf download on the web. I've been wanting to read up on the Wyckoff method and VSA for some time.

I had no idea that Wyckoff used Point and Figure charts. I read through the first thirteen chapters rather quickly and went through the P&F chart examples he gives.

Wow, Point & Figure charts have been a complete epiphany for me. It's been evident to me that I am hopeless at reading "normal" time based bar charts. I've used every combination of "normal" time based charts and I have a myriad of saved formats including a myriad of different oscillators, indicators and moving averages. I've tried to learn to read charts and I suck at it. Reading through Wyckoff's introduction to P&F charts was an absolute eye-opener for me. At last I can see and understand the price movement in the market. I can see the uptrends, downtrends, reversals, distributions and accumulation phases clearly. It's as if Wyckoff has waved his hand over a chart before me to reveal its true hidden price action in the form of a P&F chart. I am just amazed and blown away at how simple and revealing P&F charts are.

The charting program I use is the one that comes with Lincoln's 'Stock Doctor" application and it doesn't handle P&F. I've reinstalled Incredible Charts and have set up a range of different box sizes and reversal counts as indicators and I've spent the past few days playing around and going over my portfolio and my watch lists. I've analysed my most recent entries and I have concluded that most of the time I have been completely clueless and wrong. My long term fundamental analysis based, income seeking stock picks have been in the main good and thank goodness for dividends! My more speculative forays have been hit and miss and studying P&F charting has revealed to me that I have not had a clue as to what I was doing in terms of being able to read price action up until now.

Hopefully as I read further into Wyckoff's book I will start to understand how to read price/volume action on a normal chart but I can truly say that reading about and studying P&F analysis has been an absolute revelation to me.

I've enjoyed reading this thread through and motorway's zealous advocacy for P&F charting and the his somewhat mystical explanations. Motorway you've provided some great information but I would encourage anyone who finds motorway's explanations a little cosmic and far-out to read through Wyckoff's explanation as a first step.

Motorway, who is your herbalist?

Just now I read the Market Technicians Association JOURNAL Issue 8 May 1980 (pp 39-48) article that Motorway posted a link to earlier http://www.mta.org/eweb/docs/Issues/08 - 1980 May.pdf I found the explaination of how to differentiate between accumulations and distributions during periods of horizontal congestion interesting especially when used to analyse where the ASX is right now. The chart snippet posted below is from Incredible Charts (free data feed) and so only goes up to the 29th of April.



The chart attached is for the XAO and is set at 1% box size on a log scale with a 1 box reversal. The pattern I am about to describe best revealed itself on this chart setting.

The first column shown started on 22nd Nov 2012 and was a long up move of 12 boxes. The second column retraced one box and the third column finished the up-trend with a four box move up. The index moved sideways until a downward move which started on the 14th March and extended down five boxes. The index found support at the same level it did back on the the 5th Feb. Subsequently the sideways pattern continued but across a lower horizontal level than before. This price action reveals that the sideways movement started as a distribution (between 21 Feb and 14 March) but once support was found it turned into a phase of accumulation (between 9 April to 23 April). See the MTA journal article linked to above. This bodes well for a bullish continuation of the index upwards. If the index breaks up to 5200 this most likely be confirmation. I switched to a 1 box with 1 box reversal P&F on a normal scale to count across the horizontal pattern to determine a target for an upswing out of the current horizontal formation (chart not shown). The most immediate target for the XAO if a breakout to the upside occurs is 5400.

I intend to post more charts into this thread and look forward to discussing them with anyone who may be interested in doing so. I'm looking forward to learning more about applying P&F analysis.

 

[Country Lad]

tinhat, I have been using P&F charts for about 30 years, with pencil and paper in the early days before charting programs were even thought of. I have also tried all the involved TA stuff and found that all too hard, too involved, time consuming, less consistently successful and less profitable. Others like tech/a are the opposite quite comfortable and successful with the stuff I don’t use.

Over the years as my system has become more and more simple, it has become more and more successful. The P&F charting is a significant part of the success.

It is unlikely that there will be much discussion about P&F charts. They are not commonly used and certainly not understood by most.

I have read a couple of books on P&F charting and over the years have gone my own way to the point I disagree with much of what is said in the books. For example, I see that the chart you gave is a one point reversal. My experience is that the optimum is 3 point reversal and any less gives false indications. Also the box size has to be consistent for the particular price range.

I tend not to discuss P&F charting with TA people because they don’t understand them and try look for a relationship with bar charts and indicators when there is none. Generally there is a disinterest in P&F because of a lack of understanding and interest. I have no issue with that as it a case of each to his own. For example, I have no interest in understanding candlestick charting.

Keep playing with it and I am sure you will find P&F charts helpful.

Cheers
Country Lad

 

[sinner]

tinhat, I have been using P&F charts for about 30 years, with pencil and paper in the early days before charting programs were even thought of. I have also tried all the involved TA stuff and found that all too hard, too involved, time consuming, less consistently successful and less profitable. Others like tech/a are the opposite quite comfortable and successful with the stuff I don’t use.

Over the years as my system has become more and more simple, it has become more and more successful. The P&F charting is a significant part of the success.

It is unlikely that there will be much discussion about P&F charts. They are not commonly used and certainly not understood by most.

I have read a couple of books on P&F charting and over the years have gone my own way to the point I disagree with much of what is said in the books. For example, I see that the chart you gave is a one point reversal. My experience is that the optimum is 3 point reversal and any less gives false indications. Also the box size has to be consistent for the particular price range.

I tend not to discuss P&F charting with TA people because they don’t understand them and try look for a relationship with bar charts and indicators when there is none. Generally there is a disinterest in P&F because of a lack of understanding and interest. I have no issue with that as it a case of each to his own. For example, I have no interest in understanding candlestick charting.

Keep playing with it and I am sure you will find P&F charts helpful.

Cheers
Country Lad

I have conducted significant research on P&F charts, along with other price only charts. IIRC your view is that a "real" P&F chart uses closing prices only? I'd be interested in hearing about your simple system, mainly curious about whether it is trading breakouts or reversals?

 

[Country Lad]

IIRC your view is that a "real" P&F chart uses closing prices only?

Correct, I have found that the other prices do not offer up as clear patterns as the close.

I'd be interested in hearing about your simple system………

Post #10 here.

……….. mainly curious about whether it is trading breakouts or reversals?

Both, for example see posts 76, 83, 86 and 88.

There are various other posts with my P&F charts.

Cheers
Country Lad

 

[sinner]

Correct, I have found that the other prices do not offer up as clear patterns as the close.



Post #10 here.



Both, for example see posts 76, 83, 86 and 88.

There are various other posts with my P&F charts.

Cheers
Country Lad

Thanks Country Lad. The charts gives me a pretty good idea, although I am not sure where OBV and "Siroc" (never heard of it before, guess it's some kind of Rate of Change indicator) fit in? Are you applying those to timeseries or P&F charts?

What I am seeing is breakout trading, I guess after you see indicator action determining a bottom or top you're looking for upside or downside P&F breakouts as appropriate, traded on the close/next days open?