Learning to read Price Action with P&F Charting

hey, HG. I personally do not subscribe to the P&F theory, but I like very much your methodical approach to it! I enjoy your posts. I think they educate people well! So, good luck to you.
 
Well I think I may have figured out what to do on low range days. I added a .25 chart for entry and traded off the .5. It wasn't a great day, but I did manage to catch a few moves for 2-3 points with mostly 4-5 tick moves so at least something gets added to the bottom line.

When there are quick moves the .25 goes beserk so I don't recommend it on a regular basis, but at least it kept me involved, I kept to my signals that I wanted to trade. No experiments.
 
Quote from PaulRon:

hey HG

I am a new trader and want to practice P&F on old markets. What software would you use for backtesting P&F? Thanks dude
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Hopefully someone can answer this. All of my tests have been manual forward testing of various patterns.
 
Quote from MAESTRO:

hey, HG. I personally do not subscribe to the P&F theory, but I like very much your methodical approach to it! I enjoy your posts. I think they educate people well! So, good luck to you.
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Thanks Maestro. It's the only thing that helped me understand price movement. No matter what system you use you still have to manage your trade. Entry is the easy part, knowing when to get the hell out is the part that determines success.
 
Quote from HolyGrail:

Thanks Maestro. It's the only thing that helped me understand price movement. No matter what system you use you still have to manage your trade. Entry is the easy part, knowing when to get the hell out is the part that determines success.
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I see that. It's good that you found something that you believe in. And, as I said, I like the fact that you are very methodical with it. Good for you man! I wish other people could learn to be that methodical. Good Luck!
 
Ok I really want to talk about trendlines, and the breaking of trendlines. What I am about to say you may disagree with in principle, and that is ok. This is my opinion from trading with these charts.

It is absolutely essential that your trendlines are drawn at 45 degrees, but also, it is essential your software handles this properly. If the boxes on your chart are not perfectly proportioned correctly your trendline will not be a proper. For those using quote tracker or metastock I can tell you immediately that their trendlines are inaccurate.

Now, here is a question that puzzled me for ages. When is there a REAL trendline break? I'm talking about one you can trade on a reliable basis. Now this doesn't come from any book, this again is just my opinion, so take it as such.

On an uptrend, the trend is NOT BROKEN until the top of the x column fails to stay above the trendline.

Vice versa on a downtrend.

Now does this mean you stay in the stock and ride out the potential loss? That is up to you. I just want you to have a better idea when a trend is truly broken(imo) so you don't buy the first time you see an x cross over a previous downtrend. The market loves to shake you out and if it can it WILL.
 

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I want to make sure that I emphasize this trend break I am talking about is pretty much for a new entry. Don't short or go long on a trend break until you get confirmation, and then buy on the next pnf signal you get.

I am not advocating holding when you get a trendline penetration if you are already in a trade. That is a personal choice. All I am saying is if it is within your risk tolerance to hold until the next column you can see if you get the confirmation or not. Make your decision after the confirmation if it is at all possible and withing your risk parameters.
 
Quote from howardcsh:

You have it right trackstar. The ideal setup is a nice triple top or quad where the last row of o,s before the breakout row of x,s is only three high. This is the best for risk reward.

You may get a great trade for your first, but like any trading system expect the first trade to test you. Trust the stop. It is below that last row of o,s or above the last row of x,s because those are support and resistance and they will usually hold. When I first started trading these signals I just used one or two contracts and took profits in total until I got comfortable with seeing the price retrace soon after a breakout. Helped me to visualize it as price breaking through a pivot and then retracing to the pivot before taking off (this is probably actually true). I am to the point of sometimes adding on on these retracements if I feel stongly about the setup. Think about the math. You buy a breakout at 1350.00 stop at 1347.50. You then take profits at 51, and 52. Price then retraces and you put in a buy stop at 1348, or 48.50. If the retracement takes out your order you now have those two or four contracts back with closer targets and even more momentum and only a one point stop.
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I would understand this more if there is some chart. Can anyone plese post a chart to make it clear. This looks very very important concept to me so it is better for me to understand properly.
 
HG

you said about trend lines

It is absolutely essential that your trendlines are drawn at 45 degrees


I donot understand the concept why trend lines should be at 45 degrees.
 
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