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

[Dentalfloss]

i thought i would start this thread as a continuation of the thread started on elitetrader by holygrail.an excellent thread and will transfer thoughts to trade2win.
if anybody wants to read up on this ,then go to dorseywright.com or better still buy the jeremy duplessis book "the definitive guide to point and figure"
it is a method of reading price action

 

[Dentalfloss]

a chart to acquaint beginners with their appearance
there is no timescale
chart is of the fste 100.daily data plot

you can see the major support level

 

[Dentalfloss]

so i will look at the latest pricen get a so we can get a feel of what we are looking at and relate it to the latest price action
s & P 500.15 min data plot
price is in a downtrend.we possibly reached an "armageddon" level.the chart is strarting to get bullish.the arrow points to a double-top breakout.but look ,we still have a res level above that if broken makes the chart even more bullish

 

[timsk]

Hi dentist007,
Always like a thread about P&F!
In your last post you say that the S&P is in a downtrend and, certainly, most people looking at the chart wouldn't argue with you about that. Can you outline how you define uptrend and downtrend in P&F terms please? I'm curious because the horizontal red line you've drawn at 1095.2 shows a breach of the double top (which is why you've drawn it, I presume) and makes the chart bullish, according to Jeremy du P'. In your view, what else needs to happen (if anything) to be able to say that the downtrend is over and that the index is now in an uptrend?
Cheers,
Tim.

 

[Dentalfloss]

Hi dentist007,
Always like a thread about P&F!
In your last post you say that the S&P is in a downtrend and, certainly, most people looking at the chart wouldn't argue with you about that. Can you outline how you define uptrend and downtrend in P&F terms please? I'm curious because the horizontal red line you've drawn at 1095.2 shows a breach of the double top (which is why you've drawn it, I presume) and makes the chart bullish, according to Jeremy du P'. In your view, what else needs to happen (if anything) to be able to say that the downtrend is over and that the index is now in an uptrend?
Cheers,
Tim.

a simple way is to draw a trendline after each signal.however,this would then crowd the
chart with too many lines.so then only draw the ones that the price came off a top/bottom.see the ones that were drawn in the chart below
the downtrend is over when there is a breach of the 45 degree trendline,usually with a signal at or near the trendline.so.yes the chart is bullish in a downtrend.bullish,being the lsat double-top signal

 

[Dentalfloss]

we shall start at the very beginning.
the chart is plotting change in price.also renko,kagi,three line break,range charts are doing the same.each type has its own way of presenting the data visually
candlesticks,bar charts,line charts give the price change over a certain time frame
so,by looking at p/f we are studying the change in price,and therefore we can study price action a a guide for future price action
"X" records the unit of price that moves up one tick.this tick value could be £1,$1.50 cents or 1p,or 1 euro.the user fixes what price change he/she wants to look at
"O"records the unit of price when it moves down 1 tick

we look at the daily data plot for google.this chart is bearish
i shall explain more as we go .this is just a feel of what we are looking at

 

[Dentalfloss]

price action ..we are looking at the current price and its relationship to previous prices
there is no time,volume,high ,low or close values.however,these can be superimposed on the chart
we can do this for any tradeable security,even property prices.we then look at the column characteristics and make certain deductions

 

[Dentalfloss]

ok...so we know now that that the user can adjust the box size..this being the increment of price change you want to look at.this will vary according to what instrument you are looking at.so for the dow at 10,000 will have a different box size to the ftse 100 at 5000
remember as price moves up the column is "X" s and as price moves down it is a column of "O"s
an important note......when the column change direction.these are the s/r areas

chart is 15 min data plot of the dow..the box size is 18 points.so when price moves up 18 points from the previous box we add an "X".vice versa if price moves down
this is a 3 box reversal chart.i will talk about that later on

 

[Dentalfloss]

very important....when the columns change direction..these are the s/r areas
so we can pick these off really quickly.we dont have to scroll back thru loads of different timeframes

these are the main s/r areas from the previous chart.price rejection by the market is easily seen.there are lots more s/r areas/minor as the columns of "X" and "O" changed direction

 

[Dentalfloss]

same chart ,but i have altered the box size to 2 points.the s/r areas are too far away from each other.the chart is too big and is unreadable.it is obvious that a box size of 2 pts for the dow on a 15 min data plot is wrong.the chart is unreadable

 

[Dentalfloss]

you can see that the columns are too long.so you have to adjust the box size to make the chart readable.that is up to the user
you can practice this for free,by going to stockcharts.com.eod charts are free
dow symbol is $indu
cable is fxb
ftse is $ftse
where it says sharp chart.click on this .it will have p/f

 

[Dentalfloss]

stockcharts.com
once you have the chart up.then to alter the box size,go to chart scale.click on scaling method and click on user defined.then choose box size.dont alter any other inputs.a nice easy way of learning the ropes

 

[Dentalfloss]

so in 1 quick look we can see alot of information on s/r.the next easy thing to see is the column characteristics.
are the columns long or short.?remember,direction change is s/r.the chart is showing you supply and demand.long columns mean the market was hot to buy or sell the stock/bond etc


chart below is 15 min data of cable..currency shares british pound.you can see that the market was eager to sell cable..long downward "O" coilumns.minor recoil "X" columns.a strong downtrend

 

[Dentalfloss]

next thing to look at is the bias on the chart
is the price action bullish or bearish..??
that is easy,we just look at the columns
what are the characteristics of the columns.??
are the upside columns "x" long or short
are the downside columns "O" long or short
the last few columns...who had control "X" or the"O"
also were their any rising lows or lower highs

15 minute data from nasdaq 100 index

 

[Dentalfloss]

dow 15 minute data
we can see that the bias is bearish to start ,in fact very bearish.
then we got some pullback with the rising lows

 

[Dentalfloss]

a bearish hourly plot of eurusd

 

[SM_1]

Good stuff, how long you been using P&F? I have been studying this method for a while, not very good at it yet though, but I really love this method. I often see this pattern, not sure if anyone else has, or if its been written about before, it happens on both upside and downside, will jump up/down, consolidate in a clear range then quickly go back down/up then continue to bounce in the original direction, nearly everytime I have seen it, it does it.

Do you ever see such a thing?

 

[Dentalfloss]

just an illustration of p/f stuff to look for
supports
breakouts
45 degree trendlines
etc etc

 

[wallstreet1928]

fantastic thread, just discovered it.

I will put my learning cap on ......:smart:

 

[charliechan]

always been meaning to look at p&f, but never really got round to it.

out of interest, is p&f the same as the charts richard wyckoff developed?