P&f Charts

[stock trader]

I like to know if any of you use the Point & Figure method of charting, if so, how successufully do you apply it to your analysis and what other indicators do you use with if any, I some how find it a bit akward to get to grips with, I understand how it works but can not seem to apply it effectively to my trading method which is mostly swing trading UK Stocks - I would like to have the views from those of you that use P&F with reasonable success

many thanks

ST

 

[dsmodi]

Stock Trader,

This has been discussed elsewhere on this site - you'll have to search for the board, but there should be much there to interest you. Then, if you have questions, you can post on that board.

It just avoids the repetition we seem to be getting on some subjects recently.... But of course, by all means, keep on posting....

 

[FTSE Beater]

Hi Stock Trader

At the risk of duplicating threads. P&F trading is done in the same was as bar / candlestick trading. The main difference is that P&F tends to work better over longer time-frames. Maybe because I've only used it on EOD data.

You can still trade break-out's, reversal's, Tops and bottoms and Triangles - although I've never seen a triangle on P&F chart

If you need more info, then try http://www.pfscan.com/ It's got loads of links to more articles.

HTH

 

[JonnyT]

What no triangles!

Triangle formations on P&F are often the best trigger to buy or sell IMHO. The other best signal is a reversal from a large trend IMHO.

If you have not seen one then maybe you have been using the wrong box and reversal sizes for the underlying object?

JonnyT

 

[dsmodi]

oh well - might as well enter the fray FWIW - u can even get realtime p&f through updata's TA software....

 

[JonnyT]

You can through Sierra at a much more reasonable price....

 

[stock trader]

Oh Well!!
I might as well rephrase the question...How does one use P&F intelligently or skillyfully to benefit trading analysis, I am aware as to where I can acquire the data/software and the theory as to how it works, but of all the indicators, P&F is one I find difficult to apply to my trading practically, I use PFScan but the trigger or buy & sell signal seems to appear only well after the stock has performed and yet it is claimed to be one of the more accurate indicators.

Ps dsmodi thanks for your suggestion, I could not find the thread to P&F

regards
ST

 

[Splurge]

Stock Trader - P&F is excellent for removing the time out of stock movements and as long as you follow the rules for setting box and reversal sizes (based on the range) it will provide excellent signals for medium to long term trades. It is carp for anything shorter imo (less than a week). No doubt I will be told otherwise now Ive said it.

 

[Helenqu]

Hi Stock Trader,


Here's a free course (which I did a while back) which will answer all your questions and more

http://208.149.108.63/cgi-bin/foxweb.exe/fwuniv

The classic P&F text is Dorsey on which P&F Uni course is based.

The book which Dave recommends (and I also think is more useable than Dorsey) is Michael Burkes 3 Point Reversal Method of Point and Figure.


Good luck. I like P&F and use Pfscan for UK FTSE100 stocks

 

[Skimbleshanks]

stock trader - there hasn't been a good Point & Figure thread for ages, so it is about time we had one and thank you for starting it.

I have the book Point & Figure Commodity & Stock Trading Techniques by Kermit (yes, really) Zieg - it's quite heavyweight which perhaps explains why I've never managed to plough my way through it.

Most of the main technical analysis books seem to have a section on PnF including John Murphy (but not Edwards & Magee).

If anyone is trading S&P or Dow using PnF, it would be interesting to know how you're finding it.

 

[stock trader]

Thanks for the info Helen, some how I am inclined to agree with what FTSE Beater and Splurge had to say that P&F is not really suitable for swing trading, I think its fine for LTBH. I have a number of books written by reputable authors with very good content but here again they do not tend to dwell on the practicals of trading (also on that not I recently purchased a book on swing trading by a Marc Rivalland in my opinion I would not give it any stars a waste of money I'd say, I'd do much better trading just using Candles!) Skimbleshanks, I have Kermit Ziegs book, but here again his trading style seems to point to LTBH, but I agree with you that it would be interesting to know if anyone out there is trading using P&F how effective is it really??

regards
ST

 

[DaveJB]

Hi,
using the (plug) tool I added to the latest version of Pfscan I've looked at some 30,000 P&F trades from the FT350 and S&P500 going back to the start of the tech crash. Before going further I'll make the point that I think P&F traditional methods suit LTBH more, and a 'good' trade can also start off with a bad dip at some point that any trailing stop method will exit on.... if you are prepared to set a BIG initial stop, unlike me, you might find overall hit rates improve - old studies give 70% good calls as typical for P&F. which I can only find by filtering for specific short trades.
Overall, and this is fairly preliminary analysis, it looks to me like you can expect a system built on P&F signals to return around 50-55% winners, some percentages drop to mid 40's, others up to around 60. This is based on a system that buys at the close on the signal day, sells at close on sell date, and runs a trailing stop to signal exits. By adding further factors such as exits on the daily bars moving for x days against the trade, the P&F changing bull:bear etc, the percentages alter a little.
The average hold of these 'automatic trades' varies, but is in the 25-35 day range usually.
Comments: I purposefully adopted a conservative way of assessing this stuff - the data dump with signal info contains a 'peak price' showing you the 'best' price hit by the trade between buy and sell dates... the profit on ALL trades was around 3-5% average, using the entry/exit prices rather than the 'best' price... active management of exits could therefore get you closer to the 'best' return, which ran from around 9% to 12% average per trade. So if you were really good, then you'd have made 30,000 trades, and averaged say 10% profit across them all. (Not just the winners), in the course of 4 years.
Better statisticians than I can no doubt make more of this, I only scratched the surface, and want to expand this area of Pfscan to add filters to that 'exit selector' form to allow users to explore their trade management strategies. As I remain convinced that profit results from managing positions better, and the 'hit rate' matters less, then I find the initial numbers encouraging - NO block of trades using all the different filters I've tested ended up losing, although the profits are sub 5% generally. Not bad for a purely mechanical system though, especially at the first attempt.
Dave

 

[Skimbleshanks]

Excellent post - thank you!

 

[DaveJB]

FWIW,
the intention is to exapnd this idea into a sort of tactic tester to give more accurate entry/exit simulation - hopefully in due course I can update this with better analysis. For info the FT350 was noticeably better (up to 10% increase in correct calls) for P&F than the SP500, which surprised me.
Dave

 

[stock trader]

I depend on Candles, Stochastics, RSI and CCI for accurate (or near accurate) entry/exits.
However if this follows with a favourable indication on P&F then this gives me more confidence to hang on to the trade for longer.
I nearly always use candles to place my stop loss. Then again having said this I suspect there remains a lot more to be said for P&F "all is not unveiled!"

ST

 

[fltbear]

Dave,
I get an average return of (only!!) about 1.5% per trade on the FTSE 100 components.
Very satisfactory but I would prefer your 5%!
What exit filters are you using to produce 5%?
Regards
FB

 

[stock trader]

Helen

You say that you like P&F and use it to trade FTSE Stocks (do you swing trade?) any chance you could expand on the strategy you apply and what might be your average return.

many thanks

ST

 

[DaveJB]

Hi,
sorry for delay - things to do, yadda yadda yadda as the saying goes <g>
Okay - I ran a LOT of variations here, but using the FT350 with a simple 'short signal, 10% target forecast' (using excel you do a 'if short=1 and target% >10 test) if you total the 'SP%' and divide by the number of actual trades (so divide total SP% by total 'short+10% target forecast or better') you get, for example, a 5.3% return. My email is [email protected], the zipped XLS file if you want to look at it is around 260k). The criteria set for this includes 'no stop loss exit' so it plays signals out until the P&F signal turns opposite to the trade. Short trades with bearish bull% with an opening stop at 20% dropping to 10% trail once entry price is passed give 66.7% good signals for 5.9% average return... I'm wary of curve fitting, 2 stage trail on SP500 adding RSI filter in with 15% initial stop closing to 10% gave me 4.9% and 6.5% returns on long and short.
It may be that the 100 is not so good, I think the exit strategy is where the money is - the 'best' figure in a trade is usually several times better than the exit price currently in the SP% columns. For waht it's worth there seem to be better returns from loose initial stops that then tighten. Target% filtering seems to be good for reducing number of trades without affecting much else.
Unfortunately perhaps the possibilities are endless - I spent around 16 hours a day for 5 days just touching the edge of the FT350 /SP500.... currently I'm working on getting a small patch out and looking to provide more options for entry/exit to increase the useability for entry/exit tactics.
Dave

 

[ChartMan]

One snippet there that you would have missed if you didn't have your brain in gear, or you may simply just not appreciate it....
" I think the exit strategy is where the money is "
Observing people trade, and examining post close charts, I have seen numerous occaisions where people have exited a trade when , even with the simplest of TA expertise, there is clearly more to go. It isn't always clear just "how much more", but unquestionably, there is more. Getting into a trade is one thing, getting out with either a minimum loss, OR a decent profit, is very hard. I consider exit strategy far more important than entry strategy yet there seems to be far more emphasis placed on "how to get in at the right place".
For those interested, search the archives for 3 peak negative divergence and 3 peak positive divergence in the DOW archives. This technique may not work for other stocks/indecies.

 

[DaveJB]

Wow Chartman,
you can follow up all my posts - you took my drivel and turned it into something that sounded like a line from 'Kung Fu' <g>