Hi Rub
Best way to learn P&F is to do it
But you need to understand the principles that underlay P&F
What is it that makes a box
what does changing the reversal do
What are trend lines measuring
what is significant about 45 degrees
What draws the chart and makes the chart move.
Du Plessis's book is a compendium
Of various aspects and practices of P&F
An appendix lists the books he has consulted
You will learn more by reading those books ( and others )
Than you will from this one book
However as a thorough introduction with
a lot of examples esp on construction
it is OK
There are only a few texts on P&F
For the reason many charting softwares can not draw them
or very well..
It is an old technique ( Holland Tulip traders ? )
Probably re invented many times
pre dates bar charting in the USA
started to be used 1880s
It is not removed from the reality of the tape
It is just Xs and Os
too simple
but so are the 1s and 0s that create all the wonders of the computer age
So simple is not the same as profound..
Or not being effective
Some OLD books are very good
because they are not removed from the reality of the "TAPE"
Some quotes below are from the free E-Book I posted a few times
Though it is ON P&F RS charting
it is still P&F , It is these principles that need to be understood
The P&F chart NEVER has to move sideways
It only does so IF..
The Author ( clay allen ) refers to "Hidden Order"
Authors from the late 1800s and early 1900s
Referred to manipulation ... A 1926 book compares charts drawn by roulette wheels to stock charts
And how the way to make the Random chart look like a Stock chart
This comes back to the 45degree movement ( no matter what the box size is )
It is what Clay Allen obviously is calling hidden order
Another important aspect of performance measurement is the element of time.
The back and forth movement of this component of the performance measurement process is recorded across the horizontal X-axis on the chart. A new column is recorded whenever a reversal of relative performance exceeds the minimum absolute amount. This converts the horizontal X-axis from the measurement of time to the measurement of alternations of trend. The alternation of trend is a function of the stock’s volatility and that is a proxy for the stock’s risk. Therefore the X-axis can be characterized as measuring risk and not time.
Hidden Order?
The stock of Best Buy was chosen for this analysis because its performance over the year 2003 was among the top 100 performing stocks in the Market Dynamics database. The time period covered by this study is 253 days, or one full year.
The lower chart is a 3-point, point-and-figure chart of the relative strength of BBY over the past year. This chart has been cropped to focus on only the record for 2003.
The BBY point-and-figure chart shows an amazingly regular upward progression with only one significant correction. BBY remained above the 45-degree bullish support line during the entire time period covered. This suggests a regular or systematic process at work to steadily propel the stock price higher, relative to the S&P 500 during this time period.
The upper chart is a histogram of the daily percent changes in the price of BBY over the past year. The histogram shows the characteristic bell shaped curve that is usually produced by a random process. The sample is slightly skewed to the right and the average daily price change is .33% per day over the past year. During this time, 54% of the days were up and 46% of the days were down””very close to 50-50.
It is striking that the raw data looks so completely random. Yet the point-and-figure chart produced from that data looks so orderly. It’s as if there was an invisible hand guiding the stock upward in a persistent and regular pattern. This example clearly shows the results of the highly effective transformation of the raw data produced by the three-box, point-and-figure methodology.
The relative strength of the stock shows the characteristic saw-tooth, back and forth action and, in this example, the upward thrusts were greater than the downward reactions as the relative strength worked its way steadily higher. The point-and-figure chart clearly shows the ability of the point-and-figure methodology to remove the noise from the data.
The positive days were larger than the negative days, so the relative strength upward trends tended to accumulate to higher levels and the downward reactions turned out to be mild. When the relationship between the up days and the down days changes, the direction of movement on the chart will change. There are many examples of orderly patterns among the best performing stocks. There also appear to be orderly patterns when the trend turns down. It is amazing that random data could be transformed into such an orderly progression on the point-and-figure chart.- 99
Manipulation Detector
Hidden Order
Invisible Hands
Xs and Os
Charts not draw by
time ( small
t )
But by something else
The rhythm of broken rhythms
Here is the link to the book on RS P&F
http://www.clayallen.com/Winning The Performance Game 12-16-2006.pdf
motorway