Learning to read Price Action with P&F Charting

H

HolyGrail

I came to ET about 2 years ago with the hope of picking up enough tidbits to become a day trader when I retire. I am definitely a type A personality, and I know I will go nuts if I don't keep my mind occupied. I think trading can keep my mind sharp for many years. I have been swing trading since 1997, but I wish I knew then what I know now.

Since I own my own business I currently have the best of both worlds. I can trade much of the day without affecting my business to any great length, and I have a great income coming in whether I am successful at trading or not. I am advantaged in that I don't have the pressures to succeed other than the pressures I place on myself. I have been successfully trading futures for only 5 months so I can't say I am , or my methods are the holy grail, but I do know at least for me my trading became consistently profitable when I allowed myself to trade with, and only with P&F charts.

I've tried just about every possible way to trade, but nothing gave me any indication of potential consistency. I did notice that some of the most successful traders only needed price to make money so I finally began pursuing charting techniques that would display price in such a way the eventually I would "get it" I looked at renko charts, tic charts, candlevolume charts, three line break charts, kagi charts, and finally point and figure charts.

This journal is being written to help those that want to learn how to read price with P&F charts. It's not going to be a "hey look what I made today journal". There will be no live trades called. I don't have time to work at the office, trade, and post. I will only answer questions during lunch, if I am available and in the evening.


If there is not any interest, I will stop the journal.
 
very interested


Quote from HolyGrail:

I came to ET about 2 years ago with the hope of picking up enough tidbits to become a day trader when I retire. I am definitely a type A personality, and I know I will go nuts if I don't keep my mind occupied. I think trading can keep my mind sharp for many years. I have been swing trading since 1997, but I wish I knew then what I know now.

Since I own my own business I currently have the best of both worlds. I can trade much of the day without affecting my business to any great length, and I have a great income coming in whether I am successful at trading or not. I am advantaged in that I don't have the pressures to succeed other than the pressures I place on myself. I have been successfully trading futures for only 5 months so I can't say I am , or my methods are the holy grail, but I do know at least for me my trading became consistently profitable when I allowed myself to trade with, and only with P&F charts.

I've tried just about every possible way to trade, but nothing gave me any indication of potential consistency. I did notice that some of the most successful traders only needed price to make money so I finally began pursuing charting techniques that would display price in such a way the eventually I would "get it" I looked at renko charts, tic charts, candlevolume charts, three line break charts, kagi charts, and finally point and figure charts.

This journal is being written to help those that want to learn how to read price with P&F charts. It's not going to be a "hey look what I made today journal". There will be no live trades called. I don't have time to work at the office, trade, and post. I will only answer questions during lunch, if I am available and in the evening.


If there is not any interest, I will stop the journal.
More...
 
Quote from gwac:

very interested
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I've always found P&F charts to be interesting.

I'd like to hear more about them. I am very happy with the way I trade, and have been studying options for a long time now, which takes up most of my time......

But it would be interesting to see how you use P&F charting, etc. Always up for learning something new. Good idea HG.
 
HG, I'm definitely interested in learning more. I recently started using PnF charts and so far it has helped me become more consistent in intraday trading. I actually use PnF in conjunction with regular candlesticks and so far it has made a notable difference. It's alot easier to pick the trends and to stay out of chop. I only wish I had started utilizing it a long ago.

I look fwd to your contribution here. TIA.
 
I am going to start at the very beginning so if you know nothing about P&F charts this will give you a basis to start your learning. Those that know something about P&F will find this extremely boring and I apologize in advance.


Before it is all through though I will actually give you some signals that are not in any book you will find, but I promise you they have high probabilities for success. Did I back test these signals? No I did not. I did forward test them though and they are doing great.

Now lets put up a chart of point values.


If you have a stock trading at the following prices the standard box size is given below. We need this box size so we know when there is a reversal. Typically we use three boxes for a reversal so if we have a box size of 1.00 we need a full 3.00 for a reversal.



As you can see, a stock selling at 5.00 and below will have a box size of .25 cents and a reversal of .75 (3 boxes)

So let's pretend we had a stock trading at 0. For every time the stock moves up .25 before it reverses .75 cents we will place an x in the current column. If this fictional stock went straight up to a dollar we would have a column of 4 x's. If it goes up to 1.25 before it reverses to .25 cents it will have 5 x's. When we have a reversal we use Zeros to represent a change in strength.
 

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I am of the opinion(of course I could be wrong), that when you learn price action your edge in trading will never become obsolete. I love p&f charts because they are simple, yet effective. There are no indicators on the chart. No volume. No time bars. Just price. Price really tells you all you need to know. Now I know there are many ways to trade profitably so I am not going to say this is the only way, or even the best way. It is the best way for me, and it might be the best way for you.

OK, now let's see what that chart looks like if our zero stock went right up to 1.00 and then it reversed .75 cents back to .25 cents.
 

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Quote from HolyGrail:

OK, now let's see what that chart looks like if our zero stock went right up to 1.00 and then it reversed .75 cents back to .25 cents.
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Was that a Bear Stearns chart???


:D
 
Quote from 5Pillars:

Was that a Bear Stearns chart???


:D
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:D It certainly could be.

If someone will remind me I will show you how a P&F'er would have never been in BSC below 74.00
 
Quote from 5Pillars:

Was that a Bear Stearns chart???


:D
More...
LOL ... :p

When used to trade stocks PnF charting provides one of the most optimal and comprehensive methodologies known to traders and investors to consistently exact profits from the market place.

Dorsey Wright provides an extensive education in PnF charting for those who desire to trade stocks and options on a position to longer-term basis.

While I used to method to trade stocks years ago, I did not find that the edge was transferable to futures (completely different game ... much much faster), so I abandoned it in lieu of other methods of reading price action (which of necessity must incorporate volume studies for optimal trading).

Good trading.
 
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