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Learning to read Price Action with P&F Charting
- Thread starter HolyGrail
- Start date
Well Nevaden, I can already see some advantages to that method. I think where it pays off the most is when you have a long column of x's followed by a long column of o's on the standard pnf chart. You really don't know what is going on with the above other than bulls and bears seem to be equal.
Turn it over to your suggested chart and you can definitely see what is happening.
Now to compare the two charts I am going to display you really have to find the high on both charts so you know where you are looking on the chart.
This is a normal pnf for YUM. Notice during 2007 we would have been standing like a deer in headlights when we had a long column of 0's.
Turn it over to your suggested chart and you can definitely see what is happening.
Now to compare the two charts I am going to display you really have to find the high on both charts so you know where you are looking on the chart.
This is a normal pnf for YUM. Notice during 2007 we would have been standing like a deer in headlights when we had a long column of 0's.
Attachments
Now we go to the 1 box reversal chart, and we get an earlier signal that there could be trouble in this stock.
Remember with standard pnf we would have probably stayed in the stock because the 0 column did not go below the previous 0 column.
I can definitely see incorporating this into the mix to help define areas on the chart where you need more detail.
This is also the reason why I use 3 charts with different point values.
Remember with standard pnf we would have probably stayed in the stock because the 0 column did not go below the previous 0 column.
I can definitely see incorporating this into the mix to help define areas on the chart where you need more detail.
This is also the reason why I use 3 charts with different point values.
Attachments
Here is a link to a research paper on Point and Figure charting from the Queensland University of Technology School of Economics and Finance.
"Point and Figure Charting: A Computational Methodology and Trading Rule Performance in the S&P 500 Futures Market"
The paper also has an very good list of references on P&F charting.
Good trading!
"Point and Figure Charting: A Computational Methodology and Trading Rule Performance in the S&P 500 Futures Market"
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=264717#PaperDownloadAbstract
Point and Figure charting is one of the oldest practitioner techniques for analysing price movements in financial markets, yet has received almost no coverage in the academic finance literature. This paper empirically contributes to the existing trading rule literature by providing a methodology for the calculation of Point and Figure charts using ultra-high-frequency data and tests trading rules using eight objective, pre-defined trading rules on US futures contracts. In general it is found that profits were able to be generated during the test period using the Point and Figure methodology.
The paper also has an very good list of references on P&F charting.
Good trading!
HG, Wyckoff did use P&F and reading him is what got me onto this form of charting. For a good historical view on P&F the du Plessis book is again a great reference. He does an excellent chronology of the development of P&F. Glad to hear you are finding details that aren't so apparent in the 3 box charts in the 1box. I find it just about right in the ES, it is not so twitchy as a smaller increment three box but still usually will generate enough signals during a trading session to try for a decent move for day time frame trades ( I am flat at the close as a rule).
I mostly use the standard stuff, like fulcrums, catapults etc., but I am also a student of Market Profile as well and have adapted some of that into a blend with P&F. They complement each other pretty well with MP used for S/R. I try to find set ups that complement each other from both.
One thing I have noticed using the one box is that when a breakout signal generates, as in column 101 and price of 1338 in the one box chart from my previous post, and column 166 in the 3 box chart, is that if price does not retrace by at least one point after the signal then the market is leaving and probably won't allow stragglers to get on board. I found this by trying to be cute and instead of just taking the trade when the signal came, I would immediately enter an order at (in this instance) 1337, thinking that I could use market noise to improve my entry by one point. The upshot of this is it seemed like every time I didn't get filled the market would generate what would have been a very good trade, and when I was filled at the better price a profit could usually be had but it might not be more than a point or two or probably should be scratched if it doesn't go in pretty short order. As you can see in the charts, a profit of 3,6 and 10 points was available before either a two box pullback or 1338 traded again. So my conclusion from this observation (more than just this one instance, I have missed quite a few good trades trying to be "cute") is that a breakout from a consolidation level like this that does not retrace by one point can be used to gauge the strength of a potential move.
I mostly use the standard stuff, like fulcrums, catapults etc., but I am also a student of Market Profile as well and have adapted some of that into a blend with P&F. They complement each other pretty well with MP used for S/R. I try to find set ups that complement each other from both.
One thing I have noticed using the one box is that when a breakout signal generates, as in column 101 and price of 1338 in the one box chart from my previous post, and column 166 in the 3 box chart, is that if price does not retrace by at least one point after the signal then the market is leaving and probably won't allow stragglers to get on board. I found this by trying to be cute and instead of just taking the trade when the signal came, I would immediately enter an order at (in this instance) 1337, thinking that I could use market noise to improve my entry by one point. The upshot of this is it seemed like every time I didn't get filled the market would generate what would have been a very good trade, and when I was filled at the better price a profit could usually be had but it might not be more than a point or two or probably should be scratched if it doesn't go in pretty short order. As you can see in the charts, a profit of 3,6 and 10 points was available before either a two box pullback or 1338 traded again. So my conclusion from this observation (more than just this one instance, I have missed quite a few good trades trying to be "cute") is that a breakout from a consolidation level like this that does not retrace by one point can be used to gauge the strength of a potential move.
Any thoughts on Box sizes for the Forex markets?
Eur/Usd
Usd/Jpy
etc.
Thanks
(Forgive me if this posted before. I read to page 55 and have to leave for a bit)
Eur/Usd
Usd/Jpy
etc.
Thanks
(Forgive me if this posted before. I read to page 55 and have to leave for a bit)
Quote from howardcsh:
For USD/JPY try .025 x 3 and see the huge moves you can catch in this instrument. It is important to use mental stops with forex, never set a hard stop they will find it.
Basically you can do a little research on the net to find the appropriate box size for a given price.