Learning to read Price Action with P&F Charting

I am with you on this (I hope we are both right) :)

I look forward to learning about P&F charts, as of now I know very little. Thanks for starting this thread HG.

Quote from HolyGrail:

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.
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Quote from HolyGrail:

: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
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That would be cool to see - thanks.

I am using range bars a lot these days so I will watch your P&F thread and learn something new. :)
 
Now let's say the price moves up to 1.25 without going to zero. Our chart will now look like the chart below

I labeled it as a double top buy signal. This is one of the patterns where the standard book on Pnf will tell you to buy. Do I buy. It depends. Right now the only information we have is the bulls(x's) are winning the supply/demand battle at the moment.


Jimmy I hope to change your mind about trading it in futures. My main problem is having a platform that gives reliable pnf information on a timely basis. You always have to stay ahead of the game, and know exactly at what price it will reverse at all times.
 

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Ok, before we go on, lets talk about trendlines. There is only one way to draw a trendline in pnf. There is no way you can get it wrong. All trendlines are 45 degree and in this case it would start at the bottom of the first x column and move up.
 

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I also need to mention that when you daytrade you don't use the standard box sizes I mentioned earlier. We will get into that later, but those box sizes are for swing trading only. A daytrader has to be more nimble.

OK let's get some of the standard buy and sell signals out of the way.

The common patterns are called
Double top buy
double bottom sell


Triple top buy
Triple top sell



Traingle buy signals
Triangle sell signals

Bullish catapult
Bearish Catapult

Bullish Signal Reversed
Bearish Signal Reversed

Long Pole up
Long pole down

As Jimmy mentioned, I strongly suggest Point and Figure Charting by Thomas Dorsey. His latest book comes with a cd that is very helpful.
 
Thank you all for contributing. There are many sites available on the internet that probably explain the basics better than I can. I hope to give you all something that will prevent you from making large errors in trading, and at the same time give you some things that are not in any book.

For review here is a double top buy and sell signal.
 

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OK, as a side note, I will now show how a Pnf'er would never be in bear stearns unless he was short. This chart had such a drop I cannot even get it all in one copy and paste.

On march 6, you have a double bottom sell signal at 74.00

Holy Grail RULE #1

NEVER EVER CONSIDER GOING LONG ON A STOCK(there is one exception) whose last X COLUMN HAS NOT EXCEEDED THE PREVIOUS X COLUMN.
 

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here is some of the rest of bear stearns chart before the move to 2.00. You notice we have a column of x's that could not even make it to the 50% retracement level.

And there we have my only possible exception.

You can go long on any stock that has at least 20 boxes after the first reversal. So if a stock goes down 22 boxes you can buy it on the first reversal with a target of either .38 of the 22 boxes which would 6 boxes over the reversal, or you just trail your stop with three boxes until you get stopped out.

Also remember the opposite is true as well. If you see 20 straight x boxes it is time to go short on the first reversal.
 

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