Chart Patterns

Penny Picks

Member
67 6
Aye, long as you cater properly for the pattern failures (of which there are many - particularly in real time) you’re good to go.
I forgot to mention that "All Patterns" must be QUALIFIED before they can be traded.

You're right about patterns do fail. However, again, if they pass the Qualification Sniff they usually are profitable. (y)
 

f2calv

Experienced member
1,317 277
the first pattern looks loose to me, while the second pattern looks tight, sharp, and near textbook symmetrical. it can get a little subjective sometimes...
I'm surprised no-one has mentioned using the patterns detected by Point & Figure analysis, Point & Figure is objective, not subjective..

Unlike candlesticks they are objective and take away the wishy-washy to and fro conversation of, is it a pattern? or isn't it?

Point & Figure works over both short and longer term trades by removing the "noise" in the price fluctuations and only plotting real changes in supply/demand.

Now I'll admit P&F threw me for a loop the first time I looked at it, but once you understand how *simple* it really is you won't go back to sh*tty candlesticks :smart:

 
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Brumby

Established member
593 137
I'm surprised no-one has mentioned using the patterns detected by Point & Figure analysis, Point & Figure is objective, not subjective.


Do you use classic P & F or the variation three box reversal of either David Fuller or the Chartcraft method?
 

f2calv

Experienced member
1,317 277
Do you use classic P & F or the variation three box reversal of either David Fuller or the Chartcraft method?
Everything I initially learnt was been from the du Plessis book,The Definitive Guide to Point and Figure, 2nd Edition.

I use anywhere from 1-box to 5-box reversal depending on the number of data points being analysed, the major difference in how I use P&F compared to others is that I solely use tick data for the truest representation of supply/demand.

IMO candlesticks are totally arbitrary regardless of their 'precision' i.e. 1-minute, 2-minute, 15-minute, etc...

For example inside a 5 minute candle the price could bounce definitively off a level 10 times, but at the end of your 5 minutes you will see none of this reflected in the final drawn candlestick! In a P&F plot you will all see the 10 attempts to break through a level, and then know you're at a potentially trade-able/inflexion point.
 

Brumby

Established member
593 137
I forgot to mention that "All Patterns" must be QUALIFIED before they can be traded.
What does qualification mean? Not heard of this one before.

Everything I initially learnt was been from the du Plessis book,The Definitive Guide to Point and Figure, 2nd Edition.

I use anywhere from 1-box to 5-box reversal depending on the number of data points being analysed, the major difference in how I use P&F compared to others is that I solely use tick data for the truest representation of supply/demand.
My knowledge of P & F is extremely rusty by now as I have not touched it for more than 16 years. It was a syllabus requirement for my TA diploma back then.
 

barjon

Legendary member
10,339 1,577
.......For example inside a 5 minute candle the price could bounce definitively off a level 10 times, but at the end of your 5 minutes you will see none of this reflected in the final drawn candlestick! In a P&F plot you will all see the 10 attempts to break through a level, and then know you're at a potentially trade-able/inflexion point.........
Won’t you only see that if the “reversal degree” is tight enough to pick up the 10 bounce backs and print the PF reversals? Otherwise the pullbacks will leave PF unmoved and you will similarly have no idea of the 10 efforts.
 

Penny Picks

Member
67 6
I'm surprised no-one has mentioned using the patterns detected by Point & Figure analysis, Point & Figure is objective, not subjective..

Unlike candlesticks they are objective and take away the wishy-washy to and fro conversation of, is it a pattern? or isn't it?

Point & Figure works over both short and longer term trades by removing the "noise" in the price fluctuations and only plotting real changes in supply/demand.

Now I'll admit P&F threw me for a loop the first time I looked at it, but once you understand how *simple* it really is you won't go back to sh*tty candlesticks :smart:

I checked out P&F some time ago and every once in awhile I take another look. I'm in the middle of 7 decades and these ole brain cells just ain't able to decode that much any more.:eek:
 

timsk

Legendary member
7,088 1,882
I checked out P&F some time ago and every once in awhile I take another look. I'm in the middle of 7 decades and these ole brain cells just ain't able to decode that much any more.:eek:
Hi Penny Picks,
If you - or anyone else for that matter - are struggling with PnF, I recommend looking at Renko instead. Very similar to PnF in many ways, but a little easier to get one's head around and, IMO, just as good.
Tim.
 

Penny Picks

Member
67 6
What does qualification mean? Not heard of this one before.

My knowledge of P & F is extremely rusty by now as I have not touched it for more than 16 years. It was a syllabus requirement for my TA diploma back then.
I use the 123 patterns quite a lot. To qualify as a trade-able pattern there is a litmus test that must be passed.
  1. Bottom or Top of a trend
  2. Three indicators MUST show a divergence from price
  3. Indicators I use
  4. 1. RSI
  5. 2. Stochastics
  6. 3. MACD
  7. The combination of #1 & #2 RSI/Stochastic works a little better than the 2 separate.

There are a few others that work to show a divergence to price but these are pretty standard.

The 'TREND' must be a considered. I've tried the 2 basic patterns
  1. 123 TOP / BOTTOM
  2. BULL ? BEAR FLAGS
in the middle of a trend and got clobbered.

I'm a 'Small Cap / Penny' stock trader and my 1st move is to do a trend search, Monthly/Weekly/Daily.

When the trends end let the games begin.(y)

One last point. I never 'SHORT' a stock. I'm lousy at that.:cool:
 
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f2calv

Experienced member
1,317 277
Won’t you only see that if the “reversal degree” is tight enough to pick up the 10 bounce backs and print the PF reversals? Otherwise the pullbacks will leave PF unmoved and you will similarly have no idea of the 10 efforts.
It's both the box-size AND the reversal amount combined that give the P&F plot it's desired precision level. So yes if you're looking at a 10x2 plot (with my below test data) you won't see much. With P&F you should hone the box size & reversal amount to match your trading style, i.e. lower numbers for scalping, higher numbers for swing trading/trend following.

Using a very rudimentary scalping example, i.e. the DAX banging up underneath resistance at 13,000.

Lets assume the start time is 13:00 until 13:15 (i.e. 15 minutes duration), here are some (fabricated) "ticks";

12,990 - OPEN
12,991
12,995
12,994
12,998
13,000 - 1st hit on 13k
12,996
12,995
12,998
12,993
12,995
13,000 - 2nd hit on 13k
13,001 - HIGH
12,997
12,996
12,999
13,000 - 3rd hit on 13k
12,995
12,993
12,989 - LOW
12,991
12,995 - CLOSE

Your 5-minute OHLC candlestick will be as follows;

OPEN - 12,990
HIGH - 13,001
LOW - 12,989
CLOSE - 12,995

A candlestick would show an upper wick of 6 points, with a green body 5 points in height, and a lower wick of 6 points.

However a 1x2 or a 2x2 P&F plot would show the price hitting and reversing on the 13,000 price level 3 times - on the 4th attempt you would be able to attempt a scalp short with a R/R of 2.

Sorry a picture is worth a thousand words but I'm lacking in artistic skill/time :)
If I can find the time I'll post some candlestick vs. P&F comparison charts, in a separate thread.

Note;
- Obviously in 15-minutes you'd actually have thousands upon thousands of ticks.
- Renko charts are basically identical to P&F charts but with a hard-coded reversal of 1.
- My maths might be out in above example by a point here and there but I hope you should get the idea?
 

barjon

Legendary member
10,339 1,577
It's both the box-size AND the reversal amount combined that give the P&F plot it's desired precision level. So yes if you're looking at a 10x2 plot (with my below test data) you won't see much. With P&F you should hone the box size & reversal amount to match your trading style, i.e. lower numbers for scalping, higher numbers for swing trading/trend following.

Using a very rudimentary scalping example, i.e. the DAX banging up underneath resistance at 13,000.

Lets assume the start time is 13:00 until 13:15 (i.e. 15 minutes duration), here are some (fabricated) "ticks";

12,990 - OPEN
12,991
12,995
12,994
12,998
13,000 - 1st hit on 13k
12,996
12,995
12,998
12,993
12,995
13,000 - 2nd hit on 13k
13,001 - HIGH
12,997
12,996
12,999
13,000 - 3rd hit on 13k
12,995
12,993
12,989 - LOW
12,991
12,995 - CLOSE

Your 5-minute OHLC candlestick will be as follows;

OPEN - 12,990
HIGH - 13,001
LOW - 12,989
CLOSE - 12,995

A candlestick would show an upper wick of 6 points, with a green body 5 points in height, and a lower wick of 6 points.

However a 1x2 or a 2x2 P&F plot would show the price hitting and reversing on the 13,000 price level 3 times - on the 4th attempt you would be able to attempt a scalp short with a R/R of 2.

Sorry a picture is worth a thousand words but I'm lacking in artistic skill/time :)
If I can find the time I'll post some candlestick vs. P&F comparison charts, in a separate thread.

Note;
- Obviously in 15-minutes you'd actually have thousands upon thousands of ticks.
- Renko charts are basically identical to P&F charts but with a hard-coded reversal of 1.
- My maths might be out in above example by a point here and there but I hope you should get the idea?
Aye, you’d finish up with a very busy chart :)

Used PF for many years in the days when you had to draw your own charts. PF was easiest and used less graph paper. The advantage of having a pencil in your hand was that you got a real hands on feel for what was happening.
 
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timsk

Legendary member
7,088 1,882
. . . Used PF for many years in the days when you had to draw your own charts. PF was easiest and used less graph paper. The advantage of having a pencil in your hand was that you got a real hands on feel for what was happening.
Listen up folks - here speaks a true market veteran who understands a thing or two about how to trade . . .
C'mon, the man actually used a pencil to plot his own charts - how cool is that - kudos or what!
:cool:
 
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