Best Thread learning to read price action with p/f charts

[EmotionIsTheBigEvel]

Good advice Emo' with one notable exception - there's no need to send peeps over to ET for a solid intro to P&F - we have it all here!

Point and Figure Charting: Part 1 - The Basics
Point and Figure Charting: Part 2 - The Bits That Aren't As Basic
. . . and if the first two articles get your juices flowing, you can go on to this:
Point & Figure Gone High Tech
Enjoy!
Tim.

Sorry Tim, wasn't aware of this information on t2w.
I've read them myself, and one interesting point that stood out for me was the fact where they showed that PnF charts made up out of 1 minute close data instead of tick data would produce nicer and more reliable charts. I have seen this myself because I use Interactive broker as my data deliverer. They don't have historical tick data so when I renew a chart all history is made out of 1 minute close data while the real time gathered data is made out of tick data.
I was only brainstorming on this fact because in the PnF charts we have thrown out Time and now we would embed it again...a little bit controversial...

But nice to read.

Hey Tim, I read somewhere that you started around 2006 with PnF charts. Are you daytrading with it? And how are you doing using PnF charts? Are you using other TA stuff or only PnF?

Cheers,
Emotion

 

[EmotionIsTheBigEvel]

emotion..i dont think that ninja trader is right for p/f day trading.first of all,the "x" and the "o" must be properly formed and not squat or elongated.so that means you can draw the 45 degree trendlines to show the trend properly.i know from other ninja users,that they are going to rejig the p/f at some point.keep to 45 degree trendlines.you get a better feel
the other thing is that they must be calculated properly.so that you can look at close and hilo plot.so therefore,you can look at all aspects.althought,in day trading,a good starting point is 1 min close plot.make sure the columns are not too long
the solution is....dont use ninja for the final decision,especially with the tick plot
if you have iq feed,there is a simple solution.buy bullseye/cost $149.then add "qcollector" which is $99.you can then programme in qcollector to get any data you want,ie tick,1minute etc.it is slightly limited.but carl,the owner of bullseye is soon to come out with a real time version
even better.use updata at $75 a month.it will take iq feed

Thanks for your response and help Dentist!

You are right, working with such horrible charts is impossible. I was already planning to switch to InvestorRT, are they any good that you know? I use Interactive Brokers as my real time data feat and also as my Broker, that's why I am withholding from Bullseye, and because it doesn't have real time support yet.

Du Plessis said somewhere in his book that for day trading and the shorter time frames e.g. E-mini SP500 0.25x3 that the 45% trend lines wouldn't work. I can't test it at this moment as you pointed it out already, but what is your opinion about this?

We spoke about entering a trade already, it seems that you are following the rules of Du Plessis mostly. What about closing a position? Only when a trade goes through a trend line?

The nice trades I have noticed in my short period of PnF trading is waiting for a nice pattern to set up in line with the trend and then closing on the first dubble top/bottom sell signal. When you have charts created by 1 minute close data (not the tick) I see in good strong trends that there is mostly a very nice trend without any double top/bottom sell signal in it.

If you would have read the book of du Plessis earlier my trading career would have looked very difference ;-) Dentist, how long are you already trading with PnF charts? Are you using other TA methods too or only the PnF charts? And what kind of trading do you do with it e.g. day trading, swing trading?

Thanks,
Emotion

 

[Dentalfloss]

updata will take the feed from interactive brokers.it costs $75 a month.
not sure where you read that p/f will not work for e mini s500.only thing i can think of is log box
investor r/t,the charts ...from what i have seen .i am not sure whether they are any better than ninja.the "x" and o are not formed properly.ie elongated or squat.working with bad charts with p/f is dangerous.
exits,either p/f signal or trail stop

QUOTE=EmotionIsTheBigEvel;1111222]Thanks for your response and help Dentist!

You are right, working with such horrible charts is impossible. I was already planning to switch to InvestorRT, are they any good that you know? I use Interactive Brokers as my real time data feat and also as my Broker, that's why I am withholding from Bullseye, and because it doesn't have real time support yet.

Du Plessis said somewhere in his book that for day trading and the shorter time frames e.g. E-mini SP500 0.25x3 that the 45% trend lines wouldn't work. I can't test it at this moment as you pointed it out already, but what is your opinion about this?

We spoke about entering a trade already, it seems that you are following the rules of Du Plessis mostly. What about closing a position? Only when a trade goes through a trend line?

The nice trades I have noticed in my short period of PnF trading is waiting for a nice pattern to set up in line with the trend and then closing on the first dubble top/bottom sell signal. When you have charts created by 1 minute close data (not the tick) I see in good strong trends that there is mostly a very nice trend without any double top/bottom sell signal in it.

If you would have read the book of du Plessis earlier my trading career would have looked very difference ;-) Dentist, how long are you already trading with PnF charts? Are you using other TA methods too or only the PnF charts? And what kind of trading do you do with it e.g. day trading, swing trading?

Thanks,
Emotion[/QUOTE]

 

[Dentalfloss]

s & p 500
10 min data
a blank canvas

 

[Dentalfloss]

price is in a consolidation.so went down to the 1 minute data plot
because price action was a bit crazy and unworkable in a 3 box reversal.i went down to 2 box reversal to see if i could make sense of the price action

 

[Dentalfloss]

not an easy one to trade.the doown thrust was well behaved.aswell as the upthrust.it stuck to the bullish /bearish lines.after that,then things became more erratic
0.75 box size by 2 reversal.hilo plot

 

[Dentalfloss]

if the bullish and bearish sections become erratic like that,i always walk away.in my opinion,the market is confused and the trends are too erratic
cable...gbp usd 10 min
an orderly chart...no mess...maybe ,it will get messy..if it does ,then i will find another tradeable instrument

p/f does bring order to the chart and sorts out the chaos.something that does not happen with other charts..imho

 

[timsk]

Hey Tim, I read somewhere that you started around 2006 with PnF charts. Are you daytrading with it? And how are you doing using PnF charts? Are you using other TA stuff or only PnF?

Hi Emotion,
I've used them on and off over the years depending on what I was trading. They are not the easiest chart to use for day trading stocks IMO because the box size will vary from one stock to the next. This is a complete pain if you're watching lots of stocks during the day. However, this year, I've decided to restrict myself to futures - starting with the YM and now I'm about to switch to the ES. And yes - I will will indeed be using P&F charts to trade the ES.

Interestingly, you mention Investor RT in your post to dentist007 - who doesn't seem impressed with them! I'm about to open an account with them having demo'd their software this week. I totally disagree with d007 - I think the Investor RT P&F charts are among the best I've ever seen. They knock spots off both TradeStation's and eSignal's. They're drawn perfectly (to my way of thinking) and you can draw 'true' 45 degree trendlines very easily. Support seems excellent too. I'm very excited about using them; once I know my way around the software a bit more - I'll post some charts of the ES up here. In the meantime, you can see some of their P&F charts here:
Investor RT P&F Charts
NB - not all the charts are Investor RT's - some are MarketDelta's - so check the logo in the top left hand corner! I know d007 particularly likes his charts to have perfect square boxes so that the aspect ratio is 1:1. I tend to agree with him on this and while not all the charts on the linked webpage show this (i.e. some are squashed or elongated), there is a facility in the Investor RT P&F preferences to set the charts to a perfect square for those of us that want it.
Enjoy,
Tim.

 

[Dentalfloss]

tim
lets see some investor r/t charts.the ones i swa look skewed

 

[Dentalfloss]

tim
if you post the screenshot.i would like to see the formation of the "x" and o "s
do they form immediatley like that,or do you have to adjust the size of the chart..??

 

[timsk]

tim
if you post the screenshot.i would like to see the formation of the "x" and o "s
do they form immediatley like that,or do you have to adjust the size of the chart..??

'ere you go.



It's just a very basic chart - no bells or whistles. As I said in my earlier post, the user has the facility to set the chart to a variety of scaling options, one of which is 'automatic scaling with square boxes'. Using the mouse wheel one can then zoom in and out and the boxes remain perfect squares. No adjusting of the chart is necessary. If you're viewing a chart - which let's say has a very large and dramatic move on it - with just one click of the mouse, you can toggle to manual scaling which will enable you to compress the chart down so you can see the whole move. Basically, anything you can think of - you can do with this program! And the range of indicators is second to none.
Tim.

 

[Dentalfloss]

nice charts tim..i owe you a couple of pints of stella

 

[Dentalfloss]

eurusd.10 min data
9 pips by 3 revesal.close
we can see the move down from yesterday.needs to retrace to 3050.ie 50% for any sign of strength to show.otherewise back down we go

 

[Dentalfloss]

cable...gbpusd
20 pips by 3 reversal..hilo
10 min data plot..approx 3 weeks of data
some well defined trends
only a small pullback.since we moved into hung parliament territory

 

[Dentalfloss]

eurusd
10 min data
some nasty downside vertical counts
20 pips by 3 hilo

 

[Dentalfloss]

eurusd..10 min data
20 pips by 3 .hilo
some nasty downside vertical counts..black lines

 

[EmotionIsTheBigEvel]

Hi Dentist,

After our last discussion about PnF charts I decided to make use of the 2 weeks trial from Updata to test some PnF with it.

The problem I have with following Du Plessis strategy is that you are buying on a break out. After a breakout you often see a big retracement which not always will come back. What I found out is that you get whipsawed a lot if you keep your stop under the bottom of the pattern you used to enter the trade.

Maybe I am just missing the clue, or missing just that little point to make it profitable using PnF charts. I hope you can point me a little bit in the right direction?

I will post two charts from the same instrument only one with a .25 reversal and the other one from the same data with a .50 reversal. And I hope you are willing to point out a few trades you would have taken, and why you would have taken them?

Anyone else is also aloud to post their opinion

 

[Dentalfloss]

emotions....looking at the charts you have posted.the price action looks to choppy,even on the 0.5.the auto trendlines and the counts dont look to be too much use imho.my own opinion is to take the trendlines off.you can put them back on with one mouse click,also take off the vertical counts
i think these are confusing the chart.if you look at some of the charts i have posted..the columns are longer.ie go up a box size or two,and time plot.lthen break them down manually into bullish and bearish sections,with 45 degree trendlines,also make sure you have enough look back to have the whole trend,whether it be minor,intermediate etc.i guarantee,that within 5 seconds,you will know exactly where you are going to trade.
with these nervous markets,i have changed my rules slightly.i wait for the p/b after the breakout.you usually find that the p/b zone can be picked up using the 45 degree trendlines on other box sizes.it seems that the market will not make a decision until it sees where the p/b is..just my opinion

 

[Dentalfloss]

emotions...also do some analysis on eurusd.this has been the lead for some time.it makes up a big percentage of the dollar index

 

[timsk]

The problem I have with following Du Plessis strategy is that you are buying on a break out. After a breakout you often see a big retracement which not always will come back. What I found out is that you get whipsawed a lot if you keep your stop under the bottom of the pattern you used to enter the trade.

Hi ETBE,
Absolutely spot on!
Here's one idea for you to mull over. It's not a solution as such, just something to cogitate on. Take any chart of any instrument - including your ES (???) charts. Look for two things:
1. An uptrend with a bullish support pattern in place, i.e. an uptrend with a printed bearish resistance pattern is no good - it negates it.
2. A downtrend with a bearish resistance pattern in place, i.e. a downtrend with a printed bullish support pattern is no good.
Now, take the uptrending example. Wait for a pullback to print, i.e. a column of red Os. In line with the main rule, they must not breach the low of the previous column of red Os. Assuming a 3 box reversal chart, go long immediately a new column of 3 Xs print indicating the uptrend has resumed. If you're cheeky, you can even put in a limit order a point or two (depending on the instrument traded) beneath the price that creates the reversal. Visa versa for short trades.

The logic is very simple, namely that the momentum is with the bulls in uptrends and with the bears in downtrends. Look at any chart and you will see that if condition 1. above is met, there are precious few columns of Xs that only have the minimum required of three. A few years ago, I did a study of two years of FTSE 100 charts and, from memory, the average reversal was 5.5 X's in an uptrend and a fraction more in downtrends. The flip side of this is true in that you'll have quite a lot of columns of just three Os in an uptrend. Combine this with S&R, supply and demand analysis etc and you might have the bare bones of something workable. If this doesn't make sense, let me know and I'll try and annotate a chart to show what I'm on about.
Tim.