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Learning to read Price Action with P&F Charting
- Thread starter HolyGrail
- Start date
Quote from HooLee:
Hello tao, Amibroker can draw a pf chart, but you do need to reprocess the database. I actually 'borrowed' and modified Graham Kavanagh's code for my own use, you can find those codes in the Library area.
Sorry to bother you HooLee, but what do you mean by "
you do need to reprocess the database"?
You mean the database needs to be in ticks base? Can you be a bit more specific?
I know the 3 P&F codes you can find in the afl library by the way.
Thanks in advance!
PS.
HG thanks for your interesting thread
Quote from mark1:
Sorry to bother you HooLee, but what do you mean by "
you do need to reprocess the database"?
You mean the database needs to be in ticks base? Can you be a bit more specific?
I know the 3 P&F codes you can find in the afl library by the way.
Thanks in advance!
PS.
HG thanks for your interesting thread
Mark, I don't know that much in this regards, but if you open up those codes you see a big loop that processing the High and Low of a PF bar, without that the whole bar may only has one big X or O. Sorry this is off topic here, pm me if you need more info.
I use one minute, RTH, 0.5x3, high&low chart, btw. Please check these properties before comparing.
OK, now that we have the basics down it's time to show how to make money consistently.
To make money consistently you OBVIOUSLY have to know which signals to take and which ones to let go. We have to improve our odds, and when we have a trend we have to take FULL advantage of that trend.
Trends are very easy to see on a pnf chart. The strongest trends have at least 3 or 4 levels. A trendline does not get drawn on a chart until an x column goes above the last x column or vice versa.
Now before we get someone like marketsurfer in here telingl us that trends can only be seen in hindsight, let me answer with no that is not true. We know in pnf charting the potential first trend line and the extension of that line is in force until it is broken. Now when we are looking for trends we don't enter at that first trendline because there is a chance the next column will break it.
Here is a current chart of monsanto. It just started a level 2 trend. I like to enter on any buy signal from a level two, and add to my position any time we get a bounce off of that line. Now the risk we have is all the way down to the first trend line so you have to decide if this is within your risk parameters.
To make money consistently you OBVIOUSLY have to know which signals to take and which ones to let go. We have to improve our odds, and when we have a trend we have to take FULL advantage of that trend.
Trends are very easy to see on a pnf chart. The strongest trends have at least 3 or 4 levels. A trendline does not get drawn on a chart until an x column goes above the last x column or vice versa.
Now before we get someone like marketsurfer in here telingl us that trends can only be seen in hindsight, let me answer with no that is not true. We know in pnf charting the potential first trend line and the extension of that line is in force until it is broken. Now when we are looking for trends we don't enter at that first trendline because there is a chance the next column will break it.
Here is a current chart of monsanto. It just started a level 2 trend. I like to enter on any buy signal from a level two, and add to my position any time we get a bounce off of that line. Now the risk we have is all the way down to the first trend line so you have to decide if this is within your risk parameters.
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Here is a current chart of motorola. We currently have three levels of down trends. You will very rarely ever get more than 4 or 5 levels before we have a major pullback, but needless to say these trends can last for a very long time.
We basically want to stay short in this stock until the one of the following is reached.
1. our original target is hit.
2. we have an x column that exceeds a previous x column.
3. we have a trend line break.
The choice is yours.
We basically want to stay short in this stock until the one of the following is reached.
1. our original target is hit.
2. we have an x column that exceeds a previous x column.
3. we have a trend line break.
The choice is yours.
Attachments
Here is a current chart of hewlett packard.
If you notice there was a level 2 downtrend within this uptrend. Since we are still in an overall uptrend we would not have taken this trade, or if we had, we would have had a trailing stop on it once it reached profitablity or once the trend line broke.
The current situation is at 50 dollars this stock will now start a new level 2 uptrend. We are not there yet, but if we get there we should have a profitable trade.
If you notice there was a level 2 downtrend within this uptrend. Since we are still in an overall uptrend we would not have taken this trade, or if we had, we would have had a trailing stop on it once it reached profitablity or once the trend line broke.
The current situation is at 50 dollars this stock will now start a new level 2 uptrend. We are not there yet, but if we get there we should have a profitable trade.
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Here is a current chart of Electronic Arts.
It just formed a level 2 uptrend. Would I take this trade? No.
It might do very well, but I don't like that after the first buy signal we got a retracement all the way back down with the next 0 column. I want to see very little retracement after the first buy signal before I will enter a trade on the second buy signal.
I also wouldn't take the trade because we are right at the major downtrend line.
edit: I should mention, I WOULD take the trade at a level 3.
It just formed a level 2 uptrend. Would I take this trade? No.
It might do very well, but I don't like that after the first buy signal we got a retracement all the way back down with the next 0 column. I want to see very little retracement after the first buy signal before I will enter a trade on the second buy signal.
I also wouldn't take the trade because we are right at the major downtrend line.
edit: I should mention, I WOULD take the trade at a level 3.
Attachments
Quote from HolyGrail:
Remember never draw a trendline until an x or o column exceeds its previous x or o column, and never take any pnf signal to enter unless that signal will become at least a level two entry.
Is failed double top/bottom breakout/down an exception to the rule, or you have different rules on swing and intraday trading?