Point and Figure: Percentage or Traditional

[glebecki]

Which is a more reliable chart: a Percentage or Traditional 3-Box reversal Point and Figure chart? I mean which gives more reliable signals?

 

[praveen98]

Which is a more reliable chart: a Percentage or Traditional 3-Box reversal Point and Figure chart? I mean which gives more reliable signals?

Hi,
Both...Ultimately it depends upon the end user(trader) and how he uses the signal...I prefer log charts to traditional charts,but its a personal choice..
Happy trading,
praveen

 

[timsk]

Which is a more reliable chart: a Percentage or Traditional 3-Box reversal Point and Figure chart? I mean which gives more reliable signals?

Hi glebecki,
I agree with Praveen - both have their uses and neither one is better than the other in terms of 'more reliable signals'. That said, I think there is an argument for using the 'traditional' arithmetic fixed amount if you're trading intraday where, for example, a 10 point move on the Dow is significant. On the other hand, if you're a swing or position trader with stops and targets possibly running into hundreds of points, i.e. a 10 point move is neither here nor there to you, then the percentage log scale might be more appropriate. Note the emphasis on 'might', it's horses for courses at the end of the day!
Tim.

 

[trendie]

hi timsk,

do you use PnF?
has anyone done any tests on fractions of a 3-day range as boxes?
or used volatility as a function of box-size?

or is this overdoing it?
ta muchly.

 

[timsk]

hi timsk,

do you use PnF?
has anyone done any tests on fractions of a 3-day range as boxes?
or used volatility as a function of box-size?

or is this overdoing it?
ta muchly.

Hi trendie,
I have used P&F a lot in days gone by, but these days I'm pretty much a Renko man through and through.

I can't answer your questions I'm afraid, malaguti or dentist007 are the people to ask when it comes to the nitty gritty with P&F. However, I can tell you that it is possible to use volatility to determine box sixe by using ATR. Here's what StockCharts say about it: "Avg. True Range: Calculates the average true range of the underlying data for the period specified in the ATR Period box and uses this to set the box size for the entire chart. This allows the user to use a box size that takes the volatility of the underlying data into consideration when specifying a box size."
Tim.

 

[Dentalfloss]

if you read the new edition of Duplessis
atr is a nono
why dont you look at the candle...then
isolate the latest trend and get the same appearance on p/f
then play around with box sizes and reversals
p/f has a big problem that is not explained in the book...the wrong box sizes can skew the info
also....each trend has its own characteristics...so do not try and curve fit
it is the curve fitting that is the problem

 

[Dentalfloss]

Renko....I thought that was a small town in southern Spain !
but....
well..if you are looking at arithmetic or log boxes.It is the trendlines that are the closest you will get to pure supply and demand
however....
the trick is......take positions on the opposite side of the breakout
so...on that....it is whatever box size gives you that insight
in practice...use them both
cos all you are doing is trying to prejudge the breakout point and then get in on the other side to keep the stop tight

 

[isatrader]

You should look at both Traditional and Percentage box sizes imo, but you can use ATR to calculate the most appropriate box size to use on the Percentage chart - which I find most useful myself as every stock has different volatility. But as dentist said, don't use the ATR chart.

 

[trendie]

if you read the new edition of Duplessis
atr is a nono
why dont you look at the candle...then
isolate the latest trend and get the same appearance on p/f
then play around with box sizes and reversals
p/f has a big problem that is not explained in the book...the wrong box sizes can skew the info
also....each trend has its own characteristics...so do not try and curve fit
it is the curve fitting that is the problem

thanks for reply on this dentist007.

my understanding if PnF is that you use closing prices to identify box events.
So, if the box price is 10 pips, and market moved 50 pips and bounced back 30 pips thats a 20 pip move, and you would show 2 boxes (20 pips).
But if the market moved 50 pips and stopped right there, you would show 5 boxes.
But, if the reversal was 3 boxes, you could fool yourself into thinking that you bailed out after the 3 boxes, BUT, until the close happened, you didnt know whether the price was going to bounce back or not.

So, in the above admittedly tortuous example, if you had a 3 box reversal, in reality you would have closed out at 5 boxes.
Apologies if I got my basics wrong, as it's been a long time since I read up on PnF.
I think it was a book by Zweig!

 

[timsk]

. . .my understanding if PnF is that you use closing prices to identify box events. . .

Hi trendie,
You can use the high / lows of a period as well. I'll defer to dentist007 and malaguti to advise as to which to use and when. Oh, and isatrader too - apologies to him for not including him in the list of resident T2W P&F experts!

If you - or anyone else - wants to brush up on the basics of P&F, it's well worth checking out the articles we have right here on T2W:
Point and Figure Charting: Part 1 - The Basics by Dave Baker
Point and Figure Charting: Part 2 - The Bits That Aren't As Basic by Dave Baker
Why Use Point & Figure Charts? by Stephen Archer
Point & Figure Gone High Tech by William Rafter
Trading Stock Market Indices with "Bullish%" Breadth Indicators by Mark Glowrey
An Interview with Kermit Zieg
Tim.

 

[Hate2Lose]

Which is a more reliable chart: a Percentage or Traditional 3-Box reversal Point and Figure chart? I mean which gives more reliable signals?

Personally, I’d go for point and figure (alongside other factors). Ease of use, quicker to spot opportunities if trading very short term.

 

[malaguti]

thanks for reply on this dentist007.

my understanding if PnF is that you use closing prices to identify box events.
So, if the box price is 10 pips, and market moved 50 pips and bounced back 30 pips thats a 20 pip move, and you would show 2 boxes (20 pips).
depends on the timeframe as to when these boxes might be shown, so if this was an hourly close, and all this happened in 15mins, then you are spot on
But if the market moved 50 pips and stopped right there, you would show 5 boxes.
But, if the reversal was 3 boxes, you could fool yourself into thinking that you bailed out after the 3 boxes, BUT, until the close happened, you didnt know whether the price was going to bounce back or not.
Im not sure i understand when you say fooled yourself. P&F is only showing you whats happening, and not showing you what it considers to be superfluous, which is dictated by the box and reversal sizes. You do however know where the 3 box reversal will kick in, its just maths. Also, Im not sure why you might have bailed out. You bail out when you get a reversal signal, so far you haven't demonstrated one

So, in the above admittedly tortuous example, if you had a 3 box reversal, in reality you would have closed out at 5 boxes.
closed out, you mean exited? You wouldnt have closed out at all, but this depends on what your target was.
Apologies if I got my basics wrong, as it's been a long time since I read up on PnF.
I think it was a book by Zweig!

we might have to give specific examples to demonstrate these Trendie, as Im sure there is something specific that im not quite addressing.
As to my preferences on the topic of traditional vs percentage. I always and only use percentage for end of day and only use traditional for anything intraday. The percentage method is supposed to help with regard to larger price movements, if a stock moves from £1 to £5 what is the best box size, 1, 2, 3 etc and this is where percentage is best. Anything shorter term shouldn't require that price range discrepancy