Learning to read Price Action with P&F Charting

Courtesy of Old Trader

I'll try to post more, but let me end with this story: I knew a guy on the floor who kept a point and figure chart by hand in the pit. He'd make his columns of X's and O's, and when the column of X's went past the last column of X's that was a buy signal, a sell was the same only with the O's. One day he explained how this chart worked to the biggest trader in the pit. The trader said: You mean you want to buy if it goes up here? The chartist said: Yes. So with a big flurry the big trader started buying...and drove it up to the spot where the chartist wanted to buy. When he stepped forward to buy, the big trader sold to him! Now he asked the chartist: You want to sell down here, right? And started selling until he drove it back down to the spot where the chartist sold, and the big trader bought from him. True story.

If you buy strength and sell weakness....you are at a maximum disadvantage. The big moves you'll make money on. But then again, anyone can make money on the big ones. It's all the other routine moves...which is most of them....you're at a severe disadvantage. Something to think about.

Hope this helps some.
 
Quote from Robert Yanks:

Courtesy of Old Trader


If you buy strength and sell weakness....you are at a maximum disadvantage.
Hope this helps some.
More...

The above has to be the funniest quote I've ever read on ET. I guess the disadvantage would be you would actually make money when you buy strength and sell weakness.
 
i walked into the pit, true story, had badge for 2 weeks, had market profile chart in hand, after being asked, what chart said,,told smart ass ego induced trader we are going here, he went back to small crowd of 5 traders surrounding public order broker(charles schwab, they were just scalping against his orders and paper was thin so ,if u werent in the click, u got no part of those trades surrounding public broker) ,he tells group ,, new fool says we are going here,they all had a good laugh, 4 days later after similar daily routine, came by 4 times a day for next 6 months and asked what chart said...if you learn to read one thing successfully ,you have an edge, things were simpler then, today ,you need to successfully read 4,5,6 things successfuly to have an edge....HG(and dentist) as explained in the beginning of this thread knows how to read P n F,apply that knowledge,look for 3 or 4 confirmations in other indicators and you have the confidence to ride a trade,.... some people here(ET) say read the price action, some say read the charts, both say there way to trade is only way,if we knew how to trade , we wouldnt be perusing the blogs for clues to improve....kind of a self incriminating statement to say u have the answer while searching and posting on a blog
 
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Quote from tortoise:

I didn't complain that PnF lacked complexity. I complained that it of lacked nuance.

Sorta like your response:D
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1) P&F is a charting method First.

2) Double Tops and Double Bottoms are a trading system..

3) You could BUY a double Top . Sell a Double TOP... Or trade Underneath the patterns or at the Halfway points of the columns or ANYTHING

4) P&F has amazing nuance because of the way it is non linear and adaptive

5) But you need to realize it is a charting METHOD you can use in any way you can imagine...And not a static trading Strategy that has become associated to it.

A P&F chart is ONLY RANDOM if YOU are charting a series of coin TOSSES

The Fluctuations in the market
have memory and their own intrinsic timing ( stark difference to fair coin toss in clock time intervals )

P&F worth exploring for what it is in itself and not put the blinker on as regards TRADING SYSTEMS

Obvious Random chart ;-)

Motorway
 

Attachments

HolyGrail and older user have BEB.
You never questioned the fact that the lines of support and resistance in the soft BEB not ever executed? "In all books on P&F said that the lines exist, but if BEB on these lines to trade it will always be the loser.
Not asked this question ever? "The answer is very simple. The problem is in bad BEB drawing X and O. A simple example.
Compare the graph drawn by BEB and schedule drawn in http://stockcharts.com. The laws of painting P&F are the same, but BEB schedule does not look like the graph in http://stockcharts.com WHY?

1-
If you want to have a correctly drawing P&F, then have a link _http://www.gummy-stuff.org/PandF-charts.htm. Do not hesitate Excel correctly draws the schedule and line resistance and support in these graphs correctly.
2-
Pay attention to the label "box". If the Excel table where to write number more> 1, the schedule will have a strong filter.

This method is the filter I see the first time. Thanks to Peter Ponzo.
 
The laws are not the same. Some programs base everything on high/low, and some base it on daily close.

I use three programs including stockcharts so it really doesn't matter which one you choose as long as you stay consistent.
 
Quote from HolyGrail:

The laws are not the same. Some programs base everything on high/low, and some base it on daily close.
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laws are the same for each drawing. The future price must always be calculated from the old price box, and never from the old price. This manufacture using it for future prices exists in all models, and the high/low and Close.

Code: 
http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis: pnf_charts


BEB not have these rules and therefore the line Support and resistance in the soft BEB does not work.
 
A related topic. Richard Todd of Move the Markets was nice enough to code a free PnF version for Ninja Charts. Nice because you can use with volume too. http://www.movethemarkets.com/blog/tag/free-stuff/

I believe they are fixed to 1 tick box size and any number of boxes for reversal.

I have immediately noticed S/R areas are almost effortless to see with PnF. Good trading to all.
 
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