Point & Figure Charting - secret weapon? [Archive]

motorway

18th-August-2008, 12:14 AM

Picking up

from the MRC&Co's post

Off-topic, but I read the other day Paul Rotter uses P&F charts.

Interesting.

http://www.trading-naked.com/paul_rotter.htm

q: what timeframes are you using on your charts?
a: usually 5- - 30-min charts for trendlines and indicators. I prefer p&f charts because they give me a clearer view on patterns (triple tops). for indicators I like the CCI because it also shows the volatility of the markets

Ok interesting The Worlds most Successful Trader ...

So why P&F ?

Well there is time frame analysis
Which leads to multi time frame analysis

When your multi becomes so multi as as to contain
ALL time frames

Then you no longer have a time frame
But just the reality of the tape....
Objective waves of buying and selling...

See what you can make of this for some discussion.

I will use part of an interview with
Richard Olsen ---( My comments in the brackets )

Museum Director: Where can we see fractals in
the foreign exchange markets?

Richard Olsen: Fractals symbolise a way of
seeing things, a view which says that the statistical
properties of an object remain similar no matter
whether we look at it on a small, a large or a very
large scale.

(Point and Figure ( just change the box size ))

On the foreign-exchange markets, the
fractal element is very strongly present.

Museum Director: What role is played by the
so-called «strange attractor»? What is it, anyway?
Is that the formula?

Richard Olsen: The strange attractor is a
formula into which different values can be
inserted. The results calculated on the basis of
these values can be portrayed by a graph. That’s
called the «strange attractor». But hidden behind
that is a very simple formula.

I myself don’t use the term «strange attractor» at
all, as I don’t maintain that the foreign exchange
market is subject to such a formula. It’s much
more complex. So I try to analyse it into its
component parts by first of all using the right
magnifying-glass, so to speak.

(Point and Figure---What attractor is at work in the fluctuations ?? )

To give you a
practical example: if I were blind and had never
seen a table, but had to measure a table, I would
find it enormously difficult to measure it more or
less correctly. I would constantly get put off by the
chairs or by the table’s rounded corners - and
would arrive at completely absurd measurements.

One fundamental problem in analysing financial
markets is that we’re working on the wrong scale,
the wrong time-scale. In other words, we interpret
that scale - the spatial, physical time-scale -
entirely wrongly. We haven’t got any intrinsic time!
So we have to find out what’s meant by the term
«intrinsic time» and how it should be used.

So I’m
much more modest than the adherents of the
strange attractor - to return to that point for a
moment - since I don’t say I’ve got a formula that
can be used to explain the foreign exchange
markets. Instead, I say we’re taking up a wrong
position if we calculate using physical time.

Museum Director: So it’s not a question of
saying «I’m looking for a formula, and when I’ve
got it, then I’ve got the key.» It’s a question of
using various elements such as intrinsic time in
order to get closer to the secret of the markets.

Richard Olsen: Yes. Mandelbrot’s formula is
only an abstract mathematical aid. Everything
depends on how it’s used - in my case, for
example, I have to transform physical time into
intrinsic time and use it to find the right scale.

Museum Director: Is Olsen the first firm to use
a fractal structure as the basis of a profitable
model?

Richard Olsen: Certainly not. There are many
people who have made use of a fractal approach
without knowing. Technical analysis, for example,
is full of fractal thinking. But the people involved in
that don’t talk about a science, they simply start
from experience and see that fractal thinking is
something extremely useful.

(Point and Figure :) Tape reading ;))

Museum Director: That’s a very ambitious
approach… So we can say that although really a
whole generation is captivated by these fractal
phenomena, Olsen is more or less alone in this
sector.

( Computers led to the demise of tape reading, Now they are re discovering it.... But I think these ideas are old and have always been at the cutting edge )

Richard Olsen: Absolutely. But it’s important to
realise that that the fractal element is only one part
of the solution. The other is the intrinsic-time
concept. Without that concept, you can’t arrive at
the right solution.
Intrinsic time is a key concept

( The secret of the whole business lays in the fluctuations
anon 1898--unfolding in their own time, motorway 2008 :cool: )

Museum Director: So when we talk about
fractal structures, we’ve only got half of it…

( This is Pattern, Pattern is half only half of it )

Richard Olsen: Yes, the other half is provided by
intrinsic time. And if you build that in too, it makes
everything even more fractal. The world only
seems less fractal than it is because we operate
with physical time. But if we replace it by intrinsic
time, the world becomes much more fractal.

( so not weekly daily monthly time frames
But 1 point 2 point 4 point "Figure charts"

Not cutting by time but by (price movements ) )

Museum Director: What’s meant by «intrinsic»?
«Internal»?

Richard Olsen: Intrinsic time is - to put it a bit
drastically - when you think about real life.
In our
normal lives, physical time is a foreign body.

( KEY POINTS , KEY )

Intrinsic time is subjective time, i.e. the individually
experienced speed of the flow of time. And it’s
clear that the flow of time is different for different
objects and circumstances.

( and for different stocks and for the same stock at different times )

In the case of our forecasting models we don’t
even consider physical time. And there lies the key
to the problem.

( See KEY )

It’s important to measure time
according to different scales: in seconds, in
minutes, in hours, days or months.

( ie By volatility )

And in intrinsic
time a minute sometimes has 60 seconds,
sometimes only 10, and sometimes 1,000
seconds. And if a minute has, for example, 1,000
seconds, it means on the one hand that we
experience that minute very intensively and vividly
- but on the other hand, time subjectively seems to
flow slower in that minute.

OK from separate interview

"It's the same concept that's behind point-and-figure charting, except we (try ) do it mathematically instead of visually, which is not an insignificant achievement."

( But does that make it more or less--- than the P&F chart :)

Olsen heads Olsen Ltd. (www.olsen.ch), which is a combination hedge fund and open research project that has attracted some of the most inquisitive minds in finance - among them Benoit Mandelbrot, whose 1967 article "How Long is the Coast of Britain?" launched the field of fractal geometry.
Olsen's trading platform (www.oanda.com) uses an automated market-making engine developed by his Switzerland-based team of physicists and a Canada-based team of programmers, headed up by childhood friend Michael Stumm.

OK Just a look from one angle

The more angles the better
or maybe not

Just Do It is an option too !

It is saying (IMO )
That
To see the pattern
first dissolve the time frames
So the reality of the tape is revealed..

P&F is one tool
but probably a much misunderstood and underutilized one

So I have focused here on TIME.... The Time Element. ( as it is ,intrinsic time ) via Richard Olsen...

P&F is also about the pattern
and that is important too..

( The other half )

Sound complicated ? Naaaaaa

How simple a P&F chart really is ?

real simple-------Simply Real !

If you can not tell
Then maybe let a P&F chart
Clarify (P&F word )

A clearer view -- Paul Rotter

I had never heard of Paul Rotter
before MRC&Co posted.

So I do not know how he uses P&F
Just for Discussion:)

motorway

MRC & Co

18th-August-2008, 12:45 AM

Thanks for that Motorway.

Definately something to think about and I can definatley see the value of P&F (will have to give it some more study myself). As you say, it is the reality of the tape. It is surprising it is not as utilized. Wonder how many other great traders use it of which we are not aware of.

Rotter is a scalper, so I can imagine how the use of P&F along with the order book (level 2 data), could be very useful.

tech/a

18th-August-2008, 08:43 PM

Motorway.

Thats the first time Ive seen that (Intrinsic time related to fractal price structures).

Having said that it makes the most sence I am yet to see relative to the time component.---The missing link in most analysis one which Gann and Fibonacci attempt to equate.

Their results to me at least are less than inspiring.
Mainly due to the fact that you can plot many many "Points of interest" which are generally whittled down by confluence in various points over various timeframes.

This leads to a bunch of "Possibilities" which are of little practical value as which if ANY possiblility is accurate cannot be determined ahead of time.

Is it necessary to know?
I dont think the exact one is--but I do believe the a reasonable guide to time would be very handy but not clear in the analysis styles I have investigated.
If I have confluence in 3 very different time lines its not of any help.

I have the "Definative guide to P&F" but yet to study it.

One observation is that fast moves in either direction skew the time element severely often taking price well away from the mean and in doing so also time.
At times the mean is returned just as fast as it was removed from it and at other times the balance takes much much longer to return to the mean.

How do we know when what is likely to occur.
A severe price spike can do 3 things.
(1) Back as fast as it went.
(2) Remain where its is and continue creating a NEW mean both in time and price.
(3) Back to the mean over a great deal longer time (intrinsic time).

Great topic and food for discussion.

motorway

18th-August-2008, 11:40 PM

Without understanding
Intrinsic time and fractals

You won't get the why of P&F ( get lost in double tops and bottoms etc )

Why because P&F is

a chart of fractals in intrinsic time...

This was always the why of P&F from the late 1800 's to today

OK these words are so misused

They are spun out to sell books and courses

and the so called applications are in many cases useless..

But if you start with the less ambitious

Then you will get the most out of P&F

if you do not look at it as a bar chart
without time

Duplessis sort of touches on this

as in the "voice of the market" etc

But that is only a touch...

Wyckoff esp emphasized these aspects
in comparing the way a P&F chart moved compared to a bar chart

though obviously he did not use these terms

Consider fractal dimension

lines 1
planes 2

alternation between the two on price charts

degrees of roughness ( that are predictive )

A P&F chart is this structure revealed

without the lag of a look back period ( this point is significant for various P&F analysis )

Some more from Olsen

"Financial data and fractals have always gone hand in hand - one of the first data sets that Mandelbrot had applied his theories to was that of fluctuating cotton prices over several centuries. "Forget about chaos," Dacorogna tells me. "We have never found any chaos in our data. There is no simple formula that generates such behaviour as is found in the foreign exchange markets.

A fractal is a more general thing. A fractal produces a measure." The measure Dacorogna, Olsen, Müller and the rest of the team were really interested in was that which would measure time.

One of the reasons that physicists like Müller and Dacorogna were willing to pitch in with Olsen was that he had some very interesting ideas about time.

Hitherto, economists had always thought of time as outside of the system, a straightforward linear measure that all other changes could be related to. But the idea which fired up the Olsen team (as only physicists can be fired up) was that time was intrinsic to the system - that it was somehow dynamic and that a measure of time was needed which could stretch and contract as the system changed.

I asked Dacorogna what this meant. "Time eats things," is what he said. "We define time dynamically." Perhaps it's difficult to explain the massive impact of this statement to someone without a background in science or philosophy. With few exceptions, the history of science has been characterised by the tendency - almost never questioned - to use time as an independent measure of an experiment (or of the world in general, in the case of philosophy.)

In the twentieth century, physics has finally begun to break free of this notion that time is independent of space and action. And now the Olsen team - perhaps because a large proportion of them were physicists, and so were doing what came naturally - were junking the idea that time was an independent measure of the financial markets. It was as if they were introducing relativity theory to economics.

Olsen's explanation is just as visceral. "Actually what you can do is, when there is a price movement, you can say how much time has elapsed. Market time. Suddenly you realise that time is very, kind of, you know... you can put your hands around it." But how could fractals connect price changes and time? I still hadn't understood, so I turned to some of the many papers which O&A put out when they were still more academic research centre than rapidly growing business.

This is what I found. Think of the mountains reflected in the windows of their offices. The silhouette of the mountain range is neither one dimensional nor two dimensional - it is somewhere in between, and is said therefore to have fractional, or fractal dimensions. A piece of paper scrunched into a ball is a fractal object; it has more than two dimensions but less than three. Fractal objects have two main characteristics.

The first is that they are "self-similar across different scales". In other words, I can look at smaller and smaller portions of them, and the image I get will still be pretty much the same (imagine zooming in on that craggy mountain range.) Secondly, the apparently random nature of a fractal pattern is not really that random at all; each point is constrained by the position of the point which precedes it.
In the same way that this is true of a mountain range it is true of the price fluctuations in a capital market.

Because each price depends to some extent on the previous price, the market is not a random walk, despite what the EMH says. Remember our drunken sailor. One of the things that made his random walk a random walk was the fact that each step he took was totally independent of the previous steps. And amazingly the self-similarity across scales holds true too - believe it or not, in the foreign exchange market the pattern of volatility measured at ten minute intervals is similar to the pattern of volatility measured at hourly intervals, and similar again when measured at daily intervals.

Olsen's team found that this scaling law applied for lengths of time up to two months and beyond. Not only that, but the scaling law also holds for the frequency with which prices change direction. Market prices didn't obey a random walk however you looked at them.

So if the EMH is wrong, and price does not obey a random walk, what does it obey? After lengthy examination of their ever-expanding database (today the largest of its kind in the world), the team discovered that foreign exchange prices had a "drift exponent" of 0.58. Back to our drunken sailor. If his quayside stumbling is truly random, after 100 steps he will end up neither to the left nor to the right of where he first began (tossing a coin 100 times you'd expect to get around 50 heads and 50 tails.) In this case, we can say that his drift exponent is 0.5 - i.e. that he has no bias towards the left or the right. But say he has a dim idea of where his ship is, despite all the rum he has drunk. Now after 100 paces he always ends up somewhere to the right of the pub door - and this means that his drift exponent is no longer 0.5 but nearer, say, 0.6. (If for every 100 flips of a coin you got 60 heads and 40 tails, you'd begin to get pretty suspicious - in fact, you'd think you had a biased coin.)

To put this into context, look at the behaviour of the European Exchange Rate Mechanism (EMS). When the EMS was constrained in the early 90s, with its currencies only being allowed to fluctuate within certain bands, the drift exponent of the market for these was around 0.5. But when the bands were broadened in 1993, the drift exponent changed - to 0.58. More amazingly, when O&A did a similar study of the interest rate markets (which are not unified like foreign exchange markets but divide up into Western and Eastern regions) they found something very similar. They had found their first law of the markets. Dacorogna calls it the "Capitalism Constant", and hypothesises that any free market situation will have a similar drift exponent. Perhaps unsurprisingly, when O&A first tried to get the paper published, no journal would take it because it contradicted the EMH. "

Ok think back to the early 20th century
Wyckoff et al are making P&F charts form coin tosses and roulette wheels

discovering drift constants etc
and the change from rough (congestion) to smooth..

theory of runs and ''intrinsic time"

How this behavior stays constant as the chart is condensed
etc

( fractal )

etc etc

The text I have marked as bold
could easily be a P&F description from 1927.

Maybe it is ;)

Thing is all this can sound like B#llS*it

But then you look at a P&F chart
and that fractal world of intrinsic time
is there in full view

Two basic patterns of structure
Two basic patterns of time

combine to make the fluctuations
that are revealed on the P&F chart

and these patterns alternate
because
each point is constrained by the position of the point which precedes it

each point . each phase.

To say more will be giving away

free golden gooses :p:

motorway

tech/a

19th-August-2008, 06:50 AM

To say more will be giving away

free golden gooses

And the motive for delivering to "a Point" in a discussion is?

Thats like me presenting all the test results for techtrader and not coughing up the formulas,whilst continuing to discuss it at length.

Many people give away free golden gooses.
Do we have to pay for yours?

tech/a

28th-August-2008, 08:20 AM

Its been about 10 yrs since I have studied P&F

Back then I didnt have the access to the material thats available today.
Around half way through Du Plessis excellent work.

Certaintly more to P&F analysis than I originally gave it credit for.
Runs in parallel to Market Profile (Plotted differently of course).

An excellent work for those who wish to gain a grounding in this form of analysis.

I'm finding many golden gooses.

Timmy

28th-August-2008, 09:47 AM

P&F a good subject for discussion, thanks tech/a.

I haven't read Du Plessis.

How do you go about choosing box size and reversal criteria? For me I try to relate the box size and reversal to the sort of scale moves I am looking for. Of course, you can use a number of different box size/reversal criteria if you are running a number of PF charts (one for bigger picture view, one for smaller picture etc.), but the main PF I use is scaled to relate to my R/R.

Another use to which I try to put the PF is some VSA analysis; instead of choosing a time-based bar/candle for VSA work I use a PF scaled how I want it. I don't use the PF exclusively by the way, I use it in conjunction with bars/candles, but there is something about the logic of using VSA on a chart that is scaled according to the moves I want that appeals to me. Also, VSA on PF is still very much a work in progress with me.

BTW, putting volume on the PF chart is a technical challenge. The program I use didn't plot the volume how I wanted it so I had to use a work-around. Clunky but it works and I am used to it.

fimmwolf

2nd-September-2008, 05:54 PM

In his video, Using point and figure charts to analyze Markets,Tom Dorsey, explains that he uses point and figure charts to trade futures.

Dorsey recommends a 3 box reversal method transfer.

x's represent buyers ( move price up )

o's represent sellers ( move price down )

Simplified example Dorsey gave:

a stock at any price must make 3 consecutive move before it would be significant enough to record in the adjacent coloumn.

http://img151.imageshack.us/img151/6105/pandfcr8.png

A buy signal is where a coloumn of x's exceeds a previous coloumn of x's (see 46)

conversely, a sell signal is where a a coloumn of O's exceeds a previous coloumn of O's.

You can use any scale.

Charles Dow invented the method, though he used the actual price in his charts. Not x's and o's. That developement occurred later around 1920.

It's Snake Pliskin

3rd-September-2008, 01:58 AM

Can someone say why the P and F method is a secret weapon?

motorway

3rd-September-2008, 02:51 AM

A
buy signal is where a coloumn of x's exceeds a previous coloumn of x's (see 46)

conversely, a sell signal is where a a coloumn of O's exceeds a previous coloumn of O's.

Those are rules of a trading system...Some P&F chartists might do the opposite....

A X moving above the previous column of X is a bare fact
whether it is a "BUY" signal is a trading system rule

Charles Dow invented the method, though he used the actual price in his charts. Not x's and 0s. That development occurred later around 1920.

Available sources tend to negate the theory that Dow invented them
They seemed to have become known from ~ 1881
Dow made mention of them in his editorials

The earliest X and O charts I have seen are from the 1920's
The earliest charts I have seen only had little ticks or crosses or dots
Figures do seemed to have gained an early following
But sometimes the examples used of old charts were obviously for educational purposes

eg The "Game in Wall street" 1898

uses figures to teach the construction
but only little ticks for the trade examples

The chart is called a Fluctuation Chart

This is often referred to as the first published instruction on these type of charts...

J M Klein's Course in chart and method was published 1904 ( only seen reference to it ) was supposed to be connected to "Hoyle" of The Game.

A person watching the tide coming in and who wishes to know the exact spot which marks the high tide, sets a stick in the sand at the points reached by the incoming waves until the stick reaches a position where the waves do not come up to it, and finally recede enough to show that the tide has turned.

This method holds good in watching and determining the flood tide of the stock market. The average of twenty stocks is the peg which marks the height of the waves. The price-waves, like those of the sea, do not recede at once from the top. The force which moves them checks the inflow gradually and time elapses before it can be told with certainty whether the tide has been seen or not.

The market is always to be considered as having three movements, all going on at the same time.

There are three phases to both a primary bull market and a primary bear market
The formation of a "line" in the averages indicates accumulation or distribution

The market represents a serious well-considered effort on the part of far-sighted and well-informed men to adjust prices to such values as exist or which are expected to exist in the not too remote future

Charles Dow

This "line" is how an active trading range looks on a P&F chart

elsewhere Dow states these lines form build and flow into diagonals..

This description of the tides and waves would come naturally to someone watching

"Figure Charts"

The first recognized fully fledged book is by Victor de Villiers ( with Owen Taylor )
~1934
What many do not appreciate is De Villiers was a long time associated with
Richard Wyckoff..

What Dorsey writes as Point and Figure is really a trading system
of buy and sell signals that makes use of Point and Figure Charting

Point and Figure charting has a rich history present and future..

Where are the buy signals
Where you decide they are
depending on what "system"

For Dorsey this is a break of resistance

For Wyckoff it could well be at the opposite side of the pattern ( where that tide turns )

Some people regard a stock (or the market) in this (springboard)
position only when it breaks through an old line of resistance or
support into a higher or lower field. I claim that the beginning of
the springboard move is at the bottom of a range of accumulation, or
in the upper levels of a range of distribution.

For DeVilliers ... It was about buy and sell signals too
But Fulcrums and catapults

But Wyckoff---

From the general formations (not so-called patterns such as “saucers,” “baskets,” “fulcrums,” etc., which are popular with some purely theoretical technicians) on the figure charts we are able to detect accumulation or distribution, and we see, clearly marked, the lines of support and supply. We can also identify the marking up and marking down periods to excellent advantage by means of these charts.

To say a P&F chart is double tops and bullish support lines
IS to say bar charts are only about heads and shoulders and moving averages..

Underneath all P&F methods are the principles and essence that make it what it is .....

Classically

1 box reversal charts where the foundation for all analysis
from which 3 and 5 box reversal derived

A P&F chart needs many definitions
a digital filter
The flow of a ( superior ) map of volatility

The trading systems have extensive history

but to get at the essence questions like why are 45 degree angles drawn
what is the logic of counting need some consideration

as in everything

DYOR ;)

motorway

motorway

3rd-September-2008, 03:21 AM

Can someone say why the P and F method is a secret weapon?

I can say why some of the econophysicist say that

consider this

Problem with Volatility Measures ( He is talking about daily and weekly time frames )

Volatility for the two series are identical
Could be better described by directional change

Measuring directional change

Set a size, r% (say 0.1%)
Record the "last high" and "last low"
A new last high is recorded when:
It is above the last high
Or it is r% above the last low
A last low is recorded similarly
A change of direction (event) is defined as a "last high" followed by a "last low" or vice versa
Record the number of events

These events really describe a P&F chart

What does he use these events for

A scale of market shocks
and the basis for forecasting

Why because each "event" is
constrained by the event that precedes it ( not like a fair coin toss THIS IS VERY IMPORTANT POINT.... P&F chart is a manipulation detector )

But only it seems when mapped in intrinsic time

Problem with Volatility Measures

Now you can not predict
because you only know the intrinsic time of the past and present

Not the future

But you can forecast like like weather forecasting
because you can identify
high and low pressure systems
dynamically..

clock time is 100% predictable
next Thursday at noon
it will be 12 O'clock

But you can not forecast with that sort of time

only "intrinsic time"

What the Boxes are woven from

I have looked at P&F from 360 different degrees
I am still seeing new aspects...

Because
each point is constrained by the position of the point which precedes it

Each point is also released ... tension & relaxation

If you chart a fair coin toss , a random string. what would the chart look like ?
what would happen as you increase the condensation ( move to 3 and 5 reversal and modify box sizes ) .... The opposite that happens with a non random string...

P&F is a digital filter arranged as a decision tree

A chart of information and equivocation

( Claude Shannon )

test and response . cause and effect ( RDW )

I was convinced that the trading frequency measured a fundamental heartbeat of financial markets. Clearly it reflected the flow of information. It turns out also to be closely related to measures of liquidity.

Another Econophysicist etc

And the motive for delivering to "a Point" in a discussion is?

Thats like me presenting all the test results for techtrader and not coughing up the formulas,whilst continuing to discuss it at length.

Many people give away free golden gooses.
Do we have to pay for yours?

I have no link on my posts to any pay per view offerings

There is nothing to buy from me...

I thought ASF was a discussion forum
And no one is obligated to discuss
or continue to discuss
we are all FREE

motorway

motorway

3rd-September-2008, 04:13 AM

Snake
Here is an example
map in time.... The high being . on Mon Tues or next Friday

changes all aspects of the chart
because no longer is each point 100% constrained by the preceding

you have introduced a foreign body (clock) time.

Now map in intrinsic time ( how real life is lived by the way )
By discretization by price
and the high is defined 100% by preceding ( and succeeding) points

what the clock says will never alter a trend line

only the "events"

This is why diagonal forecasting lines ( their original name it seems)

could be drawn at 45 degrees ( only later where they called support and resistance lines )

The chart is a "squared" chart of "events"

These events betray their character by being mapped
in their intrinsic time..

I came across a large brown snake last week ( true )
I was on a narrow path about 1/2 a meter

I watched him in intrinsic time
If he moved I wanted to move first
it was the "events" that were important

I did not use a 1 min scale and because there was no movement
switch to a daily..

If you are defining time by "events"
you have all time frames by having none

The scale is in the moment
time is intrinsic
it moves or not
there is amounts of work
or not

Time is movement and duration

and has real effect

cause and effect
( The name Wyckoff practitioners give to the "Figure" chart )

Why is forecasting important
Because we all do it and have to do it
Will take an action for the utility
We choose to participate even passively

Because of something..
follow trends why ?
Buy and Hold why ?

Why enter even randomly
because we forecast something good has some probability.
and we choose to participate
rather than not.

motorway

It's Snake Pliskin

3rd-September-2008, 12:31 PM

motorway

3rd-September-2008, 01:38 PM

The bottom of the page

is a small video

http://www.clickevents.co.uk/interviews1.htm

Kermit Zeig - Anyone who has studied Point & Figure charting will be aware of Kermit, he has published many books and article on the subject.
Kermit lives just outside Washington where I met him and he told me about the simplicity of P & F for swing trading. Kermit describes himself as a veteran trader and has invested and traded all his adult life. In addition to Point & Figure Kermit is an options enthusiast and he talks freely here and shares his trading style.

The story of Robert Earl Davis contains a lesson
He doubted what his chart's were saying.
And it led to a sad outcome..

His charts were saying-
The Hunt Brothers ;)

But the "fundamentals" were not...

Davis was a very much respected researcher
on P&F he did a lot of back testing

His best known book was

Profit and Probability: Technical Analysis of the Price Fluctuations of Common Stocks by the Point and Figure Method
By Robert Earl Davis

He is from the ..P&F as a trading system School..

And a medium term to long term trader
3 box reversal EOD high/low
chartcraft ( A W Cohen )

Style

They do tend to go together because
of how objective P&F charting is, chartcraft system
is well worth study too .

motorway

motorway

6th-September-2008, 03:04 PM

Point and Figure charting has a rich history present and future..

Where are the buy signals
Where you decide they are
depending on what "system"

For Dorsey this is a break of resistance

For Wyckoff it could well be at the opposite side of the pattern ( where that tide turns )

Some people regard a stock (or the market) in this (springboard)
position only when it breaks through an old line of resistance or
support into a higher or lower field. I claim that the beginning of
the springboard move is at the bottom of a range of accumulation, or
in the upper levels of a range of distribution.

For DeVilliers ... It was about buy and sell signals too
But Fulcrums and catapults

But Wyckoff---

From the general formations (not so-called patterns such as “saucers,” “baskets,” “fulcrums,” etc., which are popular with some purely theoretical technicians) on the figure charts we are able to detect accumulation or distribution, and we see, clearly marked, the lines of support and supply. We can also identify the marking up and marking down periods to excellent advantage by means of these charts.

To say a P&F chart is double tops and bullish support lines
IS to say bar charts are only about heads and shoulders and moving averages..

Underneath all P&F methods are the principles and essence that make it what it is .....

A good example is the current action on the XAO
here is the same 25 x 3 chart

Each change of column is an event ( unlike a bar chart )

It is where demand overcame supply
or supply overcame demand..

The amount of possible information in each "event"
is visible in the length of the column that each event generates..

Information possible because
each column is a test and response
the next column qualifies by confirming or negating
the "surprise" by it's length making visible the "equivocation"..

The horizontal "coiling" is what builds the cause
( reduces "equivocation " )

You can read a story of bullish and bearish statements
with every column change
Every time there was an "event" ( it is only the "events" that can bite --my brown snake)

Some movements have no cause and do not follow through
(eg rally from oversold position) Some there is extensive work ( like the current action...

All these events following one another reveal a TREND

With more condensation... This trend is revealed with more clarity
( compare this behavior with a chart built from fair coin toss.. A random string is it's own shortest description )

The mid line is important
it is still able to make a higher low,,

The two "diagonal" lines are important too
and would have given buyers of buy signals
reason to be doubtful about a "buy" signal defined as a break of resistance.

Key point P&F is a series of events

The top of each column was resistance
The bottom of each column was support

P&F is a dynamic chart of support and resistance

( we need lots of descriptions to get anywhere near the possibilities)

Both vertical counts are still to be negated
They both were generated and activated
They are both still active considerations..

They are qualified by the diagonals
and the congestion width

A P&F does in a dynamic and adaptive way
all sorts of things that indicators on bar charts
attempt to do

consider ROC and BB ( look at the fluctuations expanding and contracting)

The P&F is already both of those things
only without a time frame or look back period

A person watching the tide coming in and who wishes to know the exact spot which marks the high tide, sets a stick in the sand at the points reached by the incoming waves until the stick reaches a position where the waves do not come up to it, and finally recede enough to show that the tide has turned.
Charles Dow 1901

Problem with Volatility Measures ( He is talking about daily and weekly time frames )

Volatility for the two series are identical
Could be better described by directional change

Measuring directional change

Set a size, r% (say 0.1%)
Record the "last high" and "last low"
A new last high is recorded when:
It is above the last high
Or it is r% above the last low
A last low is recorded similarly
A change of direction (event) is defined as a "last high" followed by a "last low" or vice versa
Record the number of events

Richard Olsen 2008

Both quotes are the same

What does a Geiger counter measure
what doe the Richter scale
what does a P&F chart

They all measure "events" that matter they are not clocks

Something moves and we want to move first...

motorway

motorway

6th-September-2008, 03:15 PM

25 x 5 chart

notice how the diagonals are now defining a different

"event" horizon which is related to a time horizon
But never a time frame
the chart will still move at what ever speed
"They" do...

instead of using different "angles"
P&F chartists used very early on
different reversals ...

These lines are the "Objective" lines
we can also draw "Subjective" lines

motorway

inrodwetrust

12th-September-2008, 03:48 PM

Hi All

And thanks to Motorway for your posts....it's finally dragged me out of my lurking status! :couch

Just briefly, I've been trying to learn/understand PnF for the last few months. I've read both Dorsey & duPlessis's recent books, with duPlessis's particularity useful for a more detailed analysis. So I kinda get your drift in your posts, but not all!! So I find this thread (& Wyckoff) interesting.

I've yet to develop a reliable system, I'm only using EOD data & only long, so I still consider myself an apprentice.

I initially used Dorsey's trading method ie. breakout, which seemed to be ok when the market rallied, but I'm finding in the current market conditions I'm getting chopped around a bit. So I'm looking at trying to into buy early in reversals.

I find PnF particularity useful for identifying/setting stops & trends.

But clearly, it is not without it's idiosyncrasies eg. wide ranging intraday reversals may give no opportunity to get the early reversal trade (ie Long Tail Down). Intraday charts may avoid this, I think. And of course whipsaws caused by false breakouts are an issue like any technical analysis tool etc.

Sometime I will probably try intraday charts and I've looked at Updata's, which is clearly currently the best PnF charting s/w available. AFAIK, ASX intraday feed is not yet avail for it, so Motorway do you use Updata with ASX EOD or intraday? or don't you trade the ASX?

As yet, I believe no publically avail s/w can reliably backtest PnF charts (so how can any of us mugs really know how good it is?). So I thought I might mention, as no one else has(I don't think so anyway), the recent release of WealthLab Developer 5.1 (I'm aware there is already a bit of a following with WLD4 on the Central Coast traders group).

It has been completely rewritten from a Pascal scripting like language(ie slow for backtesting) to C#, a complier driven platform (ie. several times faster). But there is a lot more to it than that and those interested would be better reading the product details on their site.

http://www.wealth-lab.com/Home/Default.aspx

But briefly it means opening it up to significantly more funtionality....eventually...as it's really a new product & better renamed as WLD1.0, as as yet not all functionality has been ported across. Go to the following to see differences between 4 & 5

http://www2.wealth-lab.com/WL5Wiki/(X(1)S(3vcjdcm2coac0y45xexw1e45))/Default.aspx?Page=kbProductComparison&AspxAutoDetectCookieSupport=1

and the Wiki site for more on WLD5

http://www2.wealth-lab.com/WL5Wiki/(X(1)S(d1nxy055jvm3bb554yqrxf45))/MainPage.ashx

So why WLD, because there is some code to draw PnF charts & signals that can be backtested....the catch....there is always one!...the PnF charts are primitive compared to Updata's...and only a sample Basic PnF code has been written to demo a doubletop buy/sell system. The good is that if one is a competent C# programmer(actually any MS Visual Developer), the sky's the limit to what one could code...although a few more functions like optimising will be added in future versions. The still bad is if you can't code....

I'd be curious to know what Kaveman, who wrote some PnF code for AB, thinks of WLD5.1, will it be a better platform in the long run? Who probably is one of the very few who can understand & code a PnF system. And can say if relable backtesting of PnF charts is possible.

Anyway a bit of fodder for the forum, that might be interesting to some. :D

And no, I'm not in any way affiliated with the developers of WLD etc.

Regards

motorway

12th-September-2008, 08:08 PM

hello inrodwetrust

welcome to the forum

I have been waiting on the intra day feed for the ASX
last date I have heard is October
There is an Esignal Version also

So I am using EOD data ( not updata's )

We don't really want the time of the clock deforming our charts
or constraining our charts..

So you have to use a sensible box /reversal size

eg one that would result in a chart no different to one drawn from course of sales

with the XAO 25 pt chart on a 1 box reversal there would be
time deformation becoming an issue

25pt x 3 with hi/lo very little

with course of sale data
you can go down to as fine a resolution as you like
as long as you filter the noise of the buy and sell spread ..

traditionally and ( zeig recommends the same ) no smaller than 2 tic

though tape reading charts were drawn with every eighth ( USA ) & included volume in the boxes... ( example of volume in John Durands book from 1927- Business of Trading in Stocks , check the review on Amazon JD was not Richard Wyckoff , but was a columnist at the Magazine of Wall street)
a rough example in tape reading 1910 by Wyckoff )

long tails only appear really with EOD charts Hi/lo
and "chartcraft" scaling ( USA mkts seem to have significant higher volatility historically and is the land of the reverse split -- they like to keep share prices in a certain zone )

long tails are not a problem when you are informing your 3 rev charts with 1 reversal

Zeig ( in the video above) uses Matlab for charting and backtesting

Have not had time to post much ( see a question in the Wyckoff Thread )
But saw your post and so hello :)

Duplessis's book is certainly a good introduction

The old books are well worthwhile
as are new descriptions like Olsen's

( He has patented his version of what I would call a point and figure chart)

motorway

motorway

12th-September-2008, 09:31 PM

Method and system for measuring market conditions Document Type and Number:United States Patent 20030149648 Kind Code:A1

Abstract:The present invention introduces two “event” scales for financial markets, called “scale of market shocks” (SMS), which measure the importance of the market movements. These indices are based on the price volatility and are computed by integrating mapped asset volatilities over time horizons that range from 1 hour to 42 days.

The first SMS is an absolute scale, or universal scale, allowing values of different assets to be compared directly. The second SMS is an adaptive scale, calibrated to the typical behavior of each asset allowing the relative importance of market movements to be assessed. In principle, the SMS can be constructed for any market: the indices are computed from the price time series. In the foreign exchange9e (FX) market, each index is associated with a currency pair and we derive from it an index per currency and an index for the whole market.

In order to define the most appropriate SMS, the probability distribution for the volatilities is studied first. Then, the probability distribution of the two scales is computed. For USD/DEM and USD/JPY, the relations between peaks for the SMS and major “world events” is put forward. In addition, we also measure the correlation between the Scale of Market Shocks index and the size of the next price movements, which shows a high correlation for short time intervals.

This is what we do with P&F
We also use universal scales
and adaptive scales

depending on whether we are stalking or scanning . ( updata has good scanning )

Kermit Zeig
has done backtesting following on from Davis

What makes a large difference is taking signals with trend

( you can define the trend with objective lines , subjective or with counts )

P&F naturally filters out chop and whip saw..

I call it the chart that does not move
( The Phantom is the Ghost that walks... Ghosts are not supposed to walk)
If it does move it never has to be sideways.....
This is key to understanding

Below is some of Olsen's description

It is very much like the old books

lookback and overshoot

The one P&F not in any of the books is Wyckoff's
it is the same as his Price and Volume

Thrusts and Reactions.

Shortening of thrusts
= the other side

Tests to watch for response

down and across has to = some accumulation
up and across has to = some distribution

SOT...........Watch out

Springboard..

An important part of the Wyckoff approach is the use of figure charts. Figure charts are a tool that Wyckoff traders can use to compress the action of the market or an individual issue to provide a perspective that may not be effectively provided by a bar chart. They provide an insight as to the future level of the market or future price of an individual issue. They can be effectively used as a supplement to the study of price and volume action and they can be grossly misused by traders who are caught up in wishing and hoping for things that have little chance of ever being realized.

http://www.wyckoffstockmarketinstitute.com/wyckoff_articles/Selling/figure-charts-counts-counting.htm

All the whiz bang things indicators try to do on bar charts
the P&F chart does do :2twocents.

But adaptively and with no lookback

( what is wrong with most for example rel strength studies )

motorway

motorway

15th-September-2008, 01:35 PM

Bear with it
:) , There is a lot in it :2twocents
I have tried to explain something important.
one thing of many .

A P&F chart of an information flow becomes more ( obvious) when it is condensed because it has a low Kolmogorov complexity, given by the length of the smallest repeating "template"

P&F started out as tape reading.....thrust reaction test response became reduced to fulcrums & catapults then reduction to simple, breakout patterns..
From congestion analysis to breakout analysis

( It is worthwhile considering the dynamics underlying the mechanical patterns...)

From forecasting & anticipation from what has stopped happening
to reacting to what has happened

A P&F chart of an information flow becomes more ( obvious) when it is condensed have low Kolmogorov complexity, given by the length of the smallest repeating "template"

A question what is the smallest repeating "template" to make a P&F chart

http://www.fortunecity.com/emachines/e11/86/onaroll.html

remember it is a chart of "events" an event is a self contained whole
( It is price volume & time woven together- Alexander Wheelan Study Helps in P&F )

But what is the minimum series of "events" ( not time series,, an event series... we do not trade time, but events ...moves---This can be very significant realization... A move completes, Time simple ticks Always TRADE MOVES ) )

The template ( not necessarily definitive but for example )

1st column = a disturbance ( action)
2rd column = a completed cycle of test response ( information equivocation / action reaction ) ( but you have to lock the column ,2 is not 2 until 3 is activated )
3rd column = confirmation negation
4th column = follow through , completion of the pattern / template , ( 5 point patterns Ms & Ws ( Victor de villiers , Bollinger defines 16 Ms &Ws )--- define a trend

Patterns damp and expand

key to identify an action ( thrust , impulse ) from a reaction

http://www.patternpower.com/support/

Templates are fractal ( de villiers- fulcrums in fulcrums )
because ( John Durand ) when the chart is condensed it is the completed cycles that are condensed not just disturbances
compare to time based charts , We can not say this

You go from daily to weekly etc...You are condensing time
not patterns of demand and supply
This point is SO IMPORTANT

When the chart is condensed it is the completed cycles that are condensed not just disturbances
..

RDW.........use a daily bar & a figure chart, If Figure chart is unavailable.. a weekly and monthly will ( have to)do !

Price movement does not unfold in equal units of time---something Wyckoff obviously understood---it unfolds in waves.

However you condense a P&F chart.........The reality ( voice ) of the tape is not deformed.

One of the first to realize the market is multi fractal were figure chartist's
because as they condensed their charts
the structure remained the same
The trend constants remained the same

spec cycles were condensed into spec investment cycles
spec investment cycles into investment cycles etc ( John Durand )

Because what is condensed is not time
but completed cycles

To do the same with a time chart
it would have to have a variable and adaptive time scale
in other words it would have to be transformed into a P&F chart..

motorway

motorway

15th-September-2008, 02:06 PM

A P&F chart of an information flow becomes more ( obvious) when it is condensed because it has a low Kolmogorov complexity, given by the length of the smallest repeating "template"

Do you think this chart is random ?

Each event is constrained by the preceding events , Richard Olsen

=They have a memory

So

Lines are meaningful &
Counts are meaningful

Neither would be true on a coin toss chart

We ( should) measure this "coastline" of the price (event) series
with a ruler and not a clock. If we want to see this .

However it is the events creating the lines and counts
not the other way around

= they are tools..

they can be grossly misused by traders who are caught up in wishing and hoping for things that have little chance of ever being realized.

Kermit Zeig
has done back testing following on from Davis

What makes a large difference is taking signals with trend

( you can define the trend with objective lines , subjective or with counts )

P&F naturally filters out chop and whip saw..

motorway

motorway

15th-September-2008, 02:12 PM

An early system trader

motorway

In the Ticker Magazine of August 1908, in an article entitled The Trader's Convention, by Mr. E.C. Cummings of North Wales, PA. Mr. Cummings noted that stocks often move 10 points in one direction, and gives a workout of American Sugar to prove that with proper stops, even during the 50% decline for the market of 1907, a point and figure system would have made money on the long side. He lists the following rules for his system:

Consider only movements and reactions of one point or more.
After a stock has moved in the desired direction by a point or more, wait for the reaction to that particular movement. After the reaction has terminated, and a second movement has begun one point from the ending of the reaction, buy the stock.
Protect each trade with a two point stop order.

After the second movement of a point or more has reacted, and the third movement has begun, trade again, providing the second reaction did not reach as low as the first reaction.
After two points of profits, move the stop to the purchase price.
Rules for entering shorts are symmetrical to those above.

motorway

15th-September-2008, 02:27 PM

Again is this chart Random ?

motorway

ps some consider this market the one to watch for early indications

motorway

16th-September-2008, 01:18 PM

( you can define the trend with objective lines , subjective or with counts )

just clarify ----You can use this to see in what way a trend is conforming
to eg a trend line ( Wheelan )

But true trend is the relationship of highs and lows

as distinct from action conforming to trend lines and counts

1 box reversal of the XAO

Strong M ?
next column
will instigate the transformation into a W

the W will be a response to the M as test
Ws & Ms continually transform into each other,

strong into weak
weak into strong
trend reversal
dampening expanding

motorway

motorway

19th-September-2008, 02:56 PM

Fractal sets show self similarity with respect to space. Fractal time series
have (only? ) statistical self similarity with respect to time

Take a P&F chart of any box size ( or type ) of any scale..

We will find

Single Columns going up or down

The top of every up column will be the high and close
The bottom of every up column will be the low and the open

The bottom of every down column will be the low and close
The top of every down column will be the high and open

Adjacent to every down column will be an up column

Up and Down columns will always alternate

1 is a disturbance
2 is a response

A third column will define a direction with a swing high or low
Always

The 4th will form a W or M Always

As new columns are generated
Ws transform into Ms
Transforming into Ws

they only exist when frozen on the static chart
They are in fact tendencies in movement

Causes and effects ( both at once ) efforts and results

The underlying idea of the whole is the idea of change

"Change is not meaningless -- if it were, there could be no knowledge of it " Richard Wilhelm

motorway

It is difficult to over-emphasize the importance of studying the technical position, particularly when making a speculative commitment.
RDW

Structure is Process....

"Positions" are in fact tendencies in movement ..

We start off with the reality of the tape

How can we condense ( distill ) that reality without distorting it ?

Financial data are recorded down to the tick transaction (virtually continuous time)
We mostly compare the classical ”time based” approximation to the ”move based”
approximation.
• Many possible approaches (PCA, wavelet analysis, time based, move based)
• Move based: define set of levels, and each time a level different from the last one is
hit, record it

• It is based on a very compact encoding
• It makes use of non parametric estimation
• It is opportunistic, not dogmatic: it does not favor trend following nor range trading
per se; it just exploits the data optimally.

Bruno Dupire

No matter how much we condense the P&F chart
The dynamic structure of the tape at tick level is retained
Even if we condensed a P&F chart to the point where a bull and Bear cycle
was condensed to two columns..

There would still be columns up and down
still alternating
etc etc

Digitizing the Price History
• Information compression: condenses the recent past into a sequence of binary digits.
• Keeps track of sequences of levels that have been reached.
• Extracts the relevance ( and structure) of moves .

One of the first to realize the market is multi fractal were figure chartist's
because as they condensed their charts
the structure remained the same
The trend constants remained the same

Quote:
spec cycles were condensed into spec investment cycles
spec investment cycles into investment cycles etc ( John Durand )

Because what is condensed is not time
but completed cycles

When the chart is condensed
what was a 6 column pattern
might become a 3 column pattern ( 3 columns of a larger 6 column pattern )

If P&F is to be a "Secret weapon" ( the question that is the title of the thread) P&F needs to be understood for what it is .

Two charts with trend outline .The XAO one with a 1% box size
the other with a 2% box size...

the arrows mark the same starting point...

When we condense away from the tape ( continuous ) time
With time based charts the structure and relevance of moves
is distorted, WHY ?

Price movement does not unfold in equal units of time it unfolds in waves.

motorway

motorway

5th-October-2008, 04:02 PM

What do we use P&F for
How do we scale a chart
What do the two axis represent
What do trend lines reveal
( what is trending and what through )

What are counts used for
why is it significant if a count is
1, generated
2, activated
3, fulfilled or negated
what is the logic behind counting
what is being counted

How is time important

where is support and resistance
how are they related to diagonal movement

What about volume ..

some charts follow

XAO 1% x 3

action conforming to the purple diagonal
( sometimes called a bearish resistance line )
The upside count is a weak count
generated by a 50% retracement
it has not been activated...
and can very easily be negated

The downside counts are stronger .

Generated and activated

They are active considerations
( trends last as long as counts are generated, activated and fulfilled
compare this behavior to a coin toss chart )

The upside count is useful to see how fast it is negated
or if it is activated ...

mere generation of counts = information

stocks whose action conforms to counts
= opportunity , start conforming stop conforming = identification of the non random...

something worthwhile eg to apply analysis to
There are causes that are producing effects

motorway

motorway

5th-October-2008, 04:15 PM

100pt x 1 reversal chart

this is very important chart atm

P&F is P&F when the noise of the buy sell spread is removed
( when markets gap 100 pts from close to open = such noise
hope the renko trend trader is reading )

(P&F as a tape reading chart is another thing -->stop and reverse chart)

1 box reversal charts continually generate areas of congestion
horizontal counts quantify this congestion

On what scale is order revealing itself

P&F is a superior volatilty map
volatiltiy is Risk creates Reward..

This is a chart to watch for change of behavior atm
speed ( time ) of reversals

count is active
last move up was weak

motorway

motorway

5th-October-2008, 04:24 PM

Log equivalent of the 100pt x 1

a 2% x 1

because it is price Vs reversal and
not price vs time

log linear or other
is not significant in the same sense

as long as the noise in the buy sell spread is removed
P&F is a chart of meaningful action Vs meaningful reaction

of complete cycles

motorway

motorway

5th-October-2008, 04:53 PM

A 2% bullish percent chart

~ 25% of stocks above the last point of resistance

above the last point where supply overcome demand

( some would say 25% stocks are on a buy signal,
( BUT is it better to be clear about what are the bare facts
( a BUY signal is not a fact it is an interpretation )

A P&F chart would only have us invest
where Risk is creating Reward

P&F defines what to apply other analysis too
( avoid coin toss opportunities )
or can be the start and finish of analysis as a stand alone method

breadth and relative strength techniques
( when is a breakout a breakout ? when it is a relative strength breakout )

look back at the 1% x 3 chart

how significant was the breaking of the diagonal lines
esp the first one since 2003 ?

The point we fail to remember is that public opinion in a speculative market is measured in dollars, not population. One man controlling one million dollars has double the weight of five hundred men with one thousand dollars each.

This is why the great body of opinion appears to be bullish at the top and bearish at the bottom. The multitude of small traders must be, as a plain necessity, long when prices are at the top, and short or out of the market at the bottom. The very fact that they are long at the top shows that they have been supplied with stocks from some source.

$1,000,000 deposits into super
sub prime mortgages
remember the reverse mortgage marketing to old age pensioners
etc etc etc

Yet P&F charts esp of USA mkts ( 1 box charts )
were going sideways ( very different to 1987 )

P&F chart is the chart that does not move
and if it does it never has to be sideways

motorway

19th-October-2008, 05:47 PM

While I think my method of measuring volatility works most of the time, it doesn't’t seem to be working now. We’re having wild daily swings that are cancelling each other making the market seem quiet. I suspect our market type is really volatile bear, but finding that out for sure will have to wait until we update our models to include the average true range.
Van K. Tharp

Problem with volatility measures ?

Volatility = directional change = risk

What causes directional change ?

differences of opinion

What is the most important part of analysis?

the areas of congestion

why?

Because this is where the chaos ( of differences of opinion) reigns
and where order is generated and destroyed
Reversed or recycled

To understand what support and resistance is
Requires mastery of P&F in two aspects

Structure and flow

as the coastline of prices

as a turbulent flow of prices

A P&F chart really does have a rate of change,
a momentum, a velocity etc
It really does move in alternating waves
it really does have volatility cycles

So support and resistance have two aspects

Structural
and dynamic...

congestion zones are dynamic bifurcations ( forks in the road )
which must be qualified by structure

eg counts, forecasting lines , congestion analysis..

to determine reversal from continuation...

Fractal Dimension

A line = 1
A plane = 2

When does a P&F look like a line
When does a P&F look like a plane

what do we look for when we look at structure from a different level ?

eg
If the "event volatility" is the same on a 1% chart as a 2% chart.

What is then revealed when that diverges?

eg When the 1% starts to have a faster rate of directional change ?..

The volatility on the large scale
is the container of the volatility on the smaller scale

Scale not time frame

There is only ONE time frame

That is why volatility cascades in the flow of prices
are very different to the cascades of turbulence in eddies in a stream

All scales .01% 1% 2% 4% 8% operate on the same time frame

They have different event horizons

But all meet in the NOW of the present moment

We have also revisited the analogy between finance and hydrodynamic turbulence in the light of these new
results. The structure of the interaction is different between the two phenomenon, due to their different time space
dimensionalities.

In finance, the components interacts only when they trade, resulting in all volatility
components influencing the short term volatility, whereas short term volatility is not influencing long term
volatilities. This is different from turbulence where eddies interact in space with eddies at the next scales.

It reveals a volatility cascade from long to short time horizons, with a structure
different from the one observed in turbulence.

An eddy of a given size can split into two eddies of half the size, giving
rise to the energy cascade, as first proposed by L.F. Richardson in 1922. Clearly, this is a cascade from one
scale to the next smaller scale. In finance, there is only 1 time dimension.

Therefore, the market participants
can only interact in time, and when a trader with any time horizon decides to buy or sell, he will create
volatility at the shortest time scales. In other words, the participants interact only when they trade, and it
is an “instantaneous” interaction.

I mentioned scaling
scaling is related to the existence of background volatility ( we want to detect change of meaningful behaviour ) and run theory- probaility of runs . So different to eg a Richter Scale...

Two charts 1% x 3 and a 2% x 3 both atm have same "event volatility" = very useful information

Because a P&F is really fractal a eg 4 column moving average is always
averaging the same 4 column fractal ( in this case Those Ms and Ws )

ALWAYS
( moving averages in a sense only make sense on such charts.)

= really useful information

motorway

motorway

22nd-October-2008, 02:50 PM

what do we look for when we look at structure from a different level ?

eg
If the "event volatility" is the same on a 1% chart as a 2% chart.

What is then revealed when that diverges?

The only real risk traders face is directional change .
But it is also only directional change that creates opportunity..

Directional change = Event volatility

lookback = the directional change filter ( box size + reversal)
overshoot = the size of directional movement in excess of the lookback

Overshoot has two drivers

Informational
+ Behavioural

P&F quantifies these drivers and also identifies their relevent importance ( the subsequent response + across different scales of look back -fractal Depth + Dimension )

"coarse (large event )volatility," measured at the larger Scales, predicts "fine (small event )volatility," measured at the smaller Scale, significantly better than the other way round.

The volatility on the large scale
is the container of the volatility on the smaller scale

.....that the market, when it is healthy, actually has an infinite number of investment horizons. Which means that all investors look at information differently, depending on what their investment horizon is.

Give some examples of people with different horizons.

Peters: At one end you have institutional investors like PanAgora, where we take a very long-range outlook on the markets, and the information we react to tends not to be very technical or short term so much as fundamental or longer term. The day traders, of course, are at the other end. Almost everything they do is tied to technical information. The rest of the market will typically use a little of each. Most financial planning clients would be somewhere between those extremes.

When that happens, the market is diversifying its information set. The information that is relevant to the different groups is different. So, if there is a panic at the 15-minute investment horizon, then longer-term investors like us would actually step in and stabilize the market. We would consider that a buying opportunity, because things are deviating from long-range value.

Then how do you explain these sudden routs in the market, when everybody seems to be selling?

Peters: At certain times—for instance, when the Fed is raising rates—long-term investors will decide that their long-term information is no longer useful. It becomes unreliable. When that happens, then longer-term investors will also start trading on shorter-term information. In essence, their investment horizon shrinks to a shorter interval, and the investment horizon of the total market, rather than being diversified over a long continuum, becomes more uniform at the short end.

That would explain the 1987 crash.

Peters: Exactly. What ends up happening in crashes—or exaggerated events—is that everybody is trading on the same information-set.

I find it interesting that this is essentially what the efficient-markets crowd says is happening all the time. But in the times when it actually does seem to be happening, the results are extremely unstable.

When everyone is trading on the same information-set, then they are all following one another. The result is this extreme volatility and swings in the market. The market, in essence, loses its stability, because it is losing the fractal structure.

The thing about fractals is that they have no characteristic scale. The deeper you go, the closer you look, the more you see exactly the same pattern that you saw in the larger frame of reference. In the marketplace, this characteristic scale is the investment horizon of the participants. As long as there is no characteristic scale, as long as everybody has a different investment horizon, the market is fractal and is resilient to unexpected information.

However, when everyone has the same investment horizon, the market loses that resiliency. That's when you get panics and stampedes.

You made the argument in Patterns that if we ever actually entered into an efficient market, then the market would die, that it would lose the ability to self-correct, to evolve, to adjust for change. Only a chaotic market, you said, has the vitality, if you will, to flourish.

Peters: Yes. That's because it offers opportunity. If there is no opportunity, then nobody would bother to invest.

In fact, I think you compared efficient markets to the Soviet state, which removed opportunity in the name of stability.

Edgar Peters

motorway

24th-October-2008, 03:46 PM

The volatility on the large scale
is the container of the volatility on the smaller scale

100pt x 1 reversal chart

this is very important chart atm

Just a quick update
To understand why
needs an understanding of some topics not discussed as yet

concept of "work" , "trend constants" and why both produce a 45 degree movement on a time series subject to manipulation ( as distinct from random )

1 box reversal charts continually generate areas of congestion
horizontal counts quantify this congestion

( trends last as long as counts are generated, activated and fulfilled

Fractals are like.. a ball , in a case , in a large trunk, inside a large container

All are moving in the present moment
all have their followings ( eg the ball is Day traders )

So it is not that useful to
chart the container with a monthly chart
the trunk with a weekly
the case with a daily and the ball with a 15 min

esp when the the large container
has been thrown over a cliff ...

In the marketplace, this characteristic scale is the investment horizon of the participants. As long as there is no characteristic scale, as long as everybody has a different investment horizon, the market is fractal and is resilient to unexpected information.

Dow said there were 3 horizons that made for a healthy market

Wyckoff said 4

Wyckoff defined them in terms of scale as well as time

motorway

motorway

25th-October-2008, 05:47 PM

We can represent a manipulated market by a biased coin toss

Where the bias is caused by the distribution of participants
on the coin

And a toss is caused by that distribution becoming "one sided" to degree
that activates a directional change

What is a trend ?
It is where demand or supply continues to overcome it's opposite
in a series of waves.... backing and filling...fluctuations

Reversals---- "Events"

P&F because it stops and starts ( what real resistance and support is, dynamic -something met up ahead ).

continually meets support and resistance
and continually overcomes it ( or not )

This process is "work"
The only time the chart does no work is when it stops..

What does work produce ?
A movement on average over a cycle that is 45 degrees
( cyles have different degrees )

Ths is because completed cycles are condensed and because the chart slows and stops when something ( the other side ) is met that retards it .

Trend constants
1 box reversal 2 to 1
3 box reversal 5 to 3

3 box reversal charts have special affinity to the 45 degree movement
because at some stage early in P&F development

It was recognized that a major cycle could be defined by a 45 degree movement on a chart that had an asymmetric filter.

Such that reactions against trend needed 3 units to be registered.

Such a chart , as long as on average there is a 5 unit move UP
for every 3 unit move down will conform to a 45 degree movement

When the UP cycle ends a transitional phase leads into a down cycle
where the same 5 unit thrust Vs 3 unit reaction will operate , again conforming to a 45 degree movement

The coin remains biased for long periods for a number of reasons
at bottom is the one that everyone is "following" ( some as of this moment have no choice...forced moves )

100 pt x 1
100 pt x 3

These charts will reveal
when the "waves" build down (RDW)
and we should follow the action down to 50pt 25pt 10pt
even 5pt charts

Wave: Intraday, Minor, Intermediate, Long term, Fluctuations that build-up & build-down and form trends. Actually every upward or downward swing in the market whether it amounts to many points, or only a few points, or fractions of a point consists of numerous buying & selling waves.
These have a certain duration, they run just so long as they can attract a following. When this following is exhausted
for the time being that wave comes to an end and a contrary wave sets in. These waves represent the shifting relationship of Supply to Demand.

RDW

P&F is a chart that does not treat
Price Volume or Time as separate entities
it weaves them together ( Wheelan )
into "events" ( Olsen)

That Reveal

motorway

mr.x

26th-October-2008, 01:31 PM

sails

26th-October-2008, 02:33 PM

in regard to point &figure charts richkid try hubb financial. does most exchanges including asx. I know it does p&f for the likes of bhp but dont know about the smaller end. Good for end of day mohtly yearly etc for candles. its free.

Not sure if it applies to the software you are suggesting, but Hubb's software has been known to work only with their data supply. So the expensive software purchased may not work if a cheaper data supply is preferred somewhere down the track. Read all the fine print and ask the right questions...

motorway

2nd-November-2008, 10:59 PM

Intrinsic time and heterogeneous markets
As explained in the book, Introduction to High Frequency Finance, the treatment of time in financial models is important for the success of the models. Over the past few years, the Olsen team has explored different ways for defining intrinsic time. We propose to investigate in more detail a concept of intrinsic time that is based on turning points of price moves. The thresholds of these turning points are a free parameter.

We propose to introduce a novel approach to defining volatility based on (this) intrinsic time ( P&F:2twocents). The standard definition of volatility has the serious drawback that the return measurements are defined by clock time. For financial time series which exhibit clustering of volatility at different time scales, the measurement in clock time generates spurious results. The approach of defining volatility in reference to two intrinsic time scales offers new insights and a potential break through in volatility modeling.
----

In financial markets, the flow of time is discontinuous: over weekends trading comes
to a standstill or, inversely, at news announcements there are spurts of market activity.
The confinement of analysing returns as observed in physical time is overly
restrictive. (This? :) what about 100 year+ figure charting) is a first attempt at establishing a new paradigm by looking beyond
such constraints within financial data, constituting an event-driven approach, where patterns emerge for successions of events at different magnitudes.

This alternative approach defines an activity-based time-scale called intrinsic time.
Extending this event-driven paradigm further enables us to observe new, stable patterns
of scaling and reduces the level of complexity of real-world time series.

In detail, the fixed event thresholds of different sizes define focal points, blurring out irrelevant details of the price evolution.

The price curve is dissected into so-called directional change
and overshoot sections. ( He proposes a number of relationship laws ; of DC to OS )

Richard Olsen

An event in time is a collection of many smaller moments coalesced into a measure. It is composed of factors, facts, contexts, scope, details and duration. An event begins, an event ends, but its true measure is not that simple, nor should it be; time is not to be caught and cleaned on a hook like a fish, nor is an event in time just a sequence of moments with a beginning and end.

Jeremy Hight

Every Reversal = an EVENT. OF Intrinsic Time

When do events occur ? When the "time is right"

Three words among a few..... A juncture of Exhaustion , Crystallization
and Generation ...

Events (together) do the work that create effects...

eg When does a concert start ?
at 6.00 or when performer and audience come together in a juncture / event , ( unconscious ) agreement ?

When do the events on the P&F chart occur
at 10.15 & then 11.30 :banghead:

Or when
composed of factors, facts, contexts, scope, details and duration. An event begins, an event ends, but its true measure is not that simple, nor should it be

Something is Exhausted, Crystallized
and Generated...

Through a series of iterations of a making of repetitions..
an ongoing dialectic

thesis /antithesis
assertion/reassertion
information/equivocation

etc

support/resistance demand/supply

HOPE & FEAR

All these things are the one thing that draws the columns ;)

( Wyckoff's Composite Man the CM )

Of
fixed event thresholds of different sizes defining focal points and blurring out irrelevant details of the price evolution.

This observation of Richard Olsen very much relates to the why and when ( to use ) of different reversal amounts...

The initial market reaction to an event is followed by a series of secondary reactions in which participants react to each other's reactions. "These after-effects are like the ripples on a lake after a stone has been thrown into the water," comments CEO Richard Olsen.... It is possible to predict how the ripples will pass through the lake and cause secondary reactions."

Important Point the surface of the markets is never still
so there is no beginning or end , unless a meaningful filter is being used
That is defined by the event sequence itself.....

volatility ratios = EVENT ratios , of different reversals ( Directional change filters )

P&F from very early used a filter
and different reversal and/or box sizes.

1% x 1
2% x 1

the 2% chart is containing the action
and defining the event horizon that matters atm

charts with the earlier mentioned trend outlines ( Ms & Ws )

The events that matter unfold in their ( own ) intrinsic time
When this time, this ROC , changes

Then waves are building up or down ... (changing event ratios across different magnitudes )

Work ( esp horizontal congestion) =The transfer of future Risk & Reward

How much work is seen in the width

- to exhaust , crystallize & generate

Accumulation & Distribution

trading ranges

Fear despair / adoration Hope

Swings
a series of iterations of a making of repetitions..
an ongoing dialectic
which when resolved , When the time is ripe

forced moves of a dynamic unfolded

motorway

motorway

22nd-November-2008, 06:51 PM

Again is this chart Random ?
motorway
ps some consider this market the one to watch for early indications

China, Not So Risky After All?
This post is from Michael Yoshikami, President and Chief Investment Strategist of YCMNET Advisors, a wealth management firm:

In times like these, safety takes on a whole new meaning and risk is redefined on a daily basis. China, that emerging economy with so much promise, has often been criticized as a bubble waiting to burst. Well, it turns out that the United States, Europe, Australia and the entire global economy was in the same bubble bath.

Hear that? It's the sound of the plug being pulled from the tub, bubbles bursting and whatever that remains, going down the drain. Suddenly, China doesn't seem so scary anymore.

Hey what’s a 50 or 70 percent drop among friends? We're not just experiencing a bear market, we're at the start of a global recession. Perhaps it's time to give China a second look. After all, the first asset to deflate is often the first asset to recover.

China's Shanghai Composite Index is down over 60 percent year-to-date --a bitter loss for investors that bought in at the high. But now, considering the difficult circumstances facing the rest of the world, China presents some very compelling investment opportunities.

Valuations haven't been this low in ages. China appears to be one of the most discounted markets in the world. Sure, China will have slower growth. And no doubt, there'll be less consumption from countries that import Chinese goods.

Still, the fear might just be overdone. The downturn we are seeing is cyclical, not structural. I mean really, if your growth rate goes from 9 percent to 5.5 percent, it's a matter of deciding if the glass is half full or half empty. 5.5 percent isn't too sluggish on a real world basis. Just ask any industrialized economy whether they would like a growth rate of 5.5 percent?!

The government has committed 7 percent of gross domestic product to be invested into the economy to help stimulate growth. Many of these projects are core infrastructure build-outs that will benefit China in the long term.

The stimulus package is three times greater than the United States' TARP plan. And with oil prices going from $140 a barrel to $50 a barrel, this is the perfect tailwind for an economy that imports massive amounts of energy. Similarly, the cost of other commodities have plummeted, all of which, provide China with increased profitability margins.

I was in Beijing three weeks ago and spent some time with a member of China’s monetary agency. He said that China was committed to taking aggressive action, not merely symbolic steps.

A week later, China announced the 7 percent stimulus package. With a huge amount of funds on reserve, the Chinese government has the ability to continue taking additional significant and dramatic action to bolster their economy.

Oh, to have that cash in the bank. China's got it.

China has definitely taken a major hit. But for courageous investors, this spells opportunity on a silver platter. Remember, the key to investing is to buy when significant corrections occur that overshoot reasonable valuations. Risk is defined by fluctuation.
Check out China. It might just be safer than you think.

...

Reversal Formations

Can you have a bottom ( or top ) without a reversal formation on a P&F chart ?

Do all objective (45degree) Diagonals eventually get negated ?

1 box chart---Type of Fulcrum ( named by Wheelan as a Duplex Horizontal )

= indicative of a Fear, a fear of missing out .. ( so far :) )

Swings narrowed, Thrusts Shortened
breaking of Diagonal ( will happen first on the 1 box, 3 box to confirm )
congestion at the "catapult " can lead to vigorous move ( absorption )

All box sizes and types + reversals will have the action conforming to different
diagonals ) subjective + objective...

Which one is real ?

When you understand that all the various charts are moving at their own adaptive speeds , Which also means the charts can stop...Then it is understood that all charts conform to the real behavior ( again intrinsic time , unfolding of events ) and all diagonals are real..

3 box chart..........one of a very few upside vertical counts generated since the "top" and very likely activated ( will be the first )----> Which will make the break of the diagonal profound ( instead of ostensible-------a mere appearance ostentatious etc )

If all charts are real , which box size to look at and when ?

Allow the event volatility to determine-( the unfolding events themselves their , ROC )
= The speed of reversals ( intrinsic time ) + in ( Olsen's terms ) compare the
lookback ( the reversal ) with the overshoot ( the column length that is in excess of the reversal )

eg. Ask How is this chart different to a chart if the instrument were a fair coin toss ( probability of runs )

A dead centre means something on a non random chart

what fuels a bull market ?
premature selling !

what fuels a bear market ?
premature Buying !

overbought and oversold
potentially result.

But also delayed endings (same things )

The P&F chart does not have to move
and never sideways
it could arrive and stop
or it can fluctuate
45 degree angles

work or it's absence
=different dynamics.
Also importance of position ( coming or going )

motorway

when significant corrections occur that overshoot reasonable valuations. Risk is defined by fluctuation ( then so is reward )

What is valuation ?

http://www.aussiestockforums.com/forums/showthread.php?p=363085&highlight=P%26F#post363085

James_Grenfell

22nd-November-2008, 07:05 PM

Wysiwyg

22nd-November-2008, 07:39 PM

They ignore the importance of the "herd instinct" (or the psychology of the marketplace) in market behaviour and the law of the situation (in which each period of the market has its own parameters, many of which are not formulaic).

I beg to differ and suggest charts are a direct reflection of an individual or groups action (evolved from thought) at any given moment.

Evidence shows that charts are no guarantee of future direction but a likelyhood of events can be procured from the market psychology reflected in a chart.

The Edge

23rd-November-2008, 05:02 AM

Saturday 21 November 2008

Agnostic indeed!

"...a person who denies or doubts the possibility
of ultimate knowledge in some area of study."

> I'm a charting agnostic - I don't "Not believe"
> but I don't "believe" either. Charts have an
> underlying assumption of past data pointing
> the way to the future. They ignore the
> importance of the "herd instinct" (or the
> psychology of the marketplace) in market
> behaviour and the law of the situation (in which
> each period of the market has its own
> parameters, many of which are not formulaic).

For one who doubts, you certainly have some
specific opinions, [of questionable authority] and
which seem to be of the ego.

> They ignore the importance of the "herd instinct"

Charts are a depiction of what transpired. That
would include the "herd instinct" activity, as well as
the "psychology of the marketplace."

Your assertions makes no sense.

> When we look at charts and tables we are looking
> at a selection of past factors and past results which
> must always contain certain redundancies and which
> cannot be said to reflect all possible past, current
> and future information. If you want to change a chart
> simply change the time period in which you calculate
> the results or the returns.

???

> When we look at charts...

Who is "we," for certainly it does not include me in your
little scheme?! For whom else do you speak?

> must always contain certain redundancies

Redundancies? Like what?

Always?

If charts must "always contain certain redundancies,"
the following is an illogical conclusion:

> and which cannot be said to reflect all possible
> past...information

Then which "redundancies" were excluded? Does
not "always" mean without exception?

A chart reflects ALL possible information that went
into any decision-making, for ALL of whom took action
based on their decision(s). Anything not included in
the decision-making process would be irrelevant to the
chart and not a factor for consideration.

> ...current...information

Ditto.

Actually, once current information is recorded onto a
chart, it becomes past automatically.

> ...and future information.

So, you are an agnostic who does not believe, but
still holds confusing opinions AND knows the future?

> Still charts present interesting directions that might
> possibly point to potential directions (but they do
> not reflect known future events or directions).

How could any chart "reflect known future events or
directions?"

Further, how could those same future events or
directions be "known" ahead of time?

I don't know. Maybe it is just me?

Instead of presenting yourself as an agnostic, with
knowing views, [a contradiction], why not present
yourself as you really are, confused?

At least about charts.

motorway

5th-December-2008, 01:51 PM

When fractal analysis is being done, it always rests on some type of fractal dimension. There are many types of fractal dimension or DF, but all can be condensed into one category - they are measures of complexity.

In fractal analysis, complexity is a change in detail with change in scale.

OK a move = so many boxes & so many reversals
When we halve the box size ( scale ) what changes ?

In general, we deduce the scaling rule or fractal dimension, DF, from knowing how something scales. Formally, this idea is about the relationship between N, the number of pieces and ε, the scale used to get the new pieces.

You may know with great certainty that whenever you have changed the magnification at which you were viewing something, the number of pieces always stayed the same and that only the size changed. But ask yourself this - did the detail change? Detail is what we mean when we say the number of pieces.

If the instrument is a fair coin toss..changing the scale never alters detail

runs of Hs & Ts have a given probability distribution
in so many flips there will be so many runs of Hs & Ts etc

If the instrument is a coin with a memory acting on different scales then there
is a composite man, there are waves of followings.

There is support and resistance
Accumulation and Distribution
real information
non random
trends

Then counting boxes is more than useful information
( unlike at a true roulette wheel )

A DF is, in essence, a scaling rule comparing how a pattern's detail changes with the scale at which it is considered - this is what we mean by complexity.

Support and Resistance is in a tape reading/P&F view

Just resistance.... A column reverses when resistance to it's movement is met
old resistance , last points of support & supply are only just that..

When a column changes direction = it is a disturbance. something is met
a resistance .

Wide or narrow
active or dull
exhaustion
generation
life cycle

When does a P&F look like a plane
When does a P&F look like a line
it does not have to be either
it can resolve to a point

persistence and anti-persistence
trending and mean reverting..

some charts

the charts trend because the boxes have memory
they congest because of the same reason
and because information disperses from the few to the many ( where it become
dis information ) When the columns reverse what is being met ?

The blue arrow on the S&P in 2003 is pointing to the dullness ( months 4&5 )
Not only the two lines... Since I last posted this chart ( XAO thread ) there is a low pole formed....

Shanghai --- note the matching stepping stone counts.... Is it time ?
It is a duplex horizontal fulcrum ( just need the break out )

Supply overcoming Demand------------------> leads to Supply in some way meeting demand ( various shapes ) This is the Fulcrum----------------->
leads to ?

motorway

motorway

5th-December-2008, 02:11 PM

Because we have a real chart of fractals
( and nothing else )

The use of moving averages / regression lines etc
can have a logic
1 column = a disturbance
2 column = response
3 column = makes up a four point thrust pattern
4 columns = are the W & Ms

5 column is a thrust pattern and a min required to contain both a W & M
overlapped

etc

20 columns is 4 thrust patterns

How different to time based chart ??????

( moving averages on P&F were at least a consideration
as long back as the 1930's )

We have nothing else because the next column is not automatically a give
it must be generated

4 columns could form in 4 days or 4 weeks or even 6 and a half months
( Or NEVER )

So a 4 column moving average
could be a 4 day average or a 6 and a half month average
or anything at all-- what ever it should be

various structures have been given names
over the years

motorway

motorway

5th-December-2008, 08:53 PM

I'm a charting agnostic - I don't "Not believe" but I don't "believe" either. Charts have an underlying assumption of past data pointing the way to the future. They ignore the importance of the "herd instinct" (or the psychology of the marketplace) in market behaviour and the law of the situation (in which each period of the market has its own parameters, many of which are not formulaic).

When we look at charts and tables we are looking at a selection of past factors and past results which must always contain certain redundancies and which cannot be said to reflect all possible past, current and future information. If you want to change a chart simply change the time period in which you calculate the results or the returns.

Still charts present interesting directions that might possibly point to potential directions (but they do not reflect known future events or directions

The "Method" takes for granted:

That the price of a stock at any given time is correct up to the instant of the last purchase and sale (a) by the consensus of all buyers and sellers in the world and (b) by the verdict of all of the forces governing the laws of supply and demand. (what forces ? how many forces ? ALL that matter)

That the price of a stock reflects or crystallizes everything known about or bearing on from the first sale on the Exchange (or Prior) up to the present time.

That those who know more about it than the observer cannot conceal their future intentions regarding it. Their plans will be revealed in time by the stock's subsequent action.
( markup is of no use unless you accumulate first/ mark down is of no use unless you distribute first .. off who and when and where ( on the chart ) does this take place ?

Victor De Villiers, "The Point and Figure Method of Anticipating Stock Price Movements", Published 1933, pg 8

"must always contain certain redundancies ( use a filter to remove redundancies ) and which cannot be said to reflect all possible past, current and future information. ( can reflect all of this to the extent that someone knows and acts ) If you want to change a chart simply change the time period in which you calculate the results or the returns. ( The biggest redundancy is tIME Filter it out and only leave Time...

After a bottom all stocks might have trading ranges of equal lengths of time , But you don't measure a trading range by time but by the amount of trading )

Charts have an underlying assumption ---> That one must act first by buying or selling- in order to sell or buy or profit in some way later"

This is the study of the technical position
of demand and supply
the flow of information
of sentiment...

Of a building of potential
Of the release of that potential
and then the decay

demand or supply exhausts
information diffuses -->along a 45 degree angle ( why ? )
sentiment subsides
complexes of an emotional tone & image
wax and wane

Bear Market , Bull market , Commodities , TECH
OIL,
are themes ---> feeling tone complexes --> images that capture and entrap but also (can )reward...

why use time charts at all then ?
Very good reason
effort is expended at a particular time ( moment )
while a cause is built over and through time

the vertical Vs the horizontal
bars vs rows

motorway

motorway

20th-December-2008, 02:26 PM

Wave: Intraday, Minor, Intermediate, Long term, Fluctuations that build-up & build-down and form trends.

You may know with great certainty that whenever you have changed the magnification at which you were viewing something, the number of pieces always stayed the same and that only the size changed. But ask yourself this - did the detail change? Detail is what we mean when we say the number of pieces.

By studying the relationships between
these upward and downward waves, their duration, speed and extent,
and comparing them with each other, we are able to judge the
relative strength of the bulls and the bears as the price movement
progresses.

As a result of this ceaseless struggle between bulls and bears, the
market eventually reaches a position in its broader swings where
these professional operators will uncover vital weakness or
strength. When such a critical condition is reached, the crisis is
usually revealed by significant developments in a comparatively
short series (few days) of small buying and selling waves. Thus,
when a period of accumulation is about completed, a study of the
small waves of the market will usually disclose the growing scarcity
of offerings which precedes the active marking up stage. Or, when a
period of distribution is about ended, a study of the small buying
and selling waves will usually reveal the imminence of the active
marking down phase.

How far does a pendulum swing ?
What is the relationship between the swing down and the swing up ?

Two types of volatility

The number of reversals
The length of columns

These charts will reveal
when the "waves" build down (RDW)
and we should follow the action down to 50pt 25pt 10pt
even 5pt charts

In fractal analysis, complexity is a change in detail with change in scale.

complexity is meaningfull change in detail not just size ( number of boxes )

We can objectively KNOW because we can count
and compare change in size to change in detail..

Question where is resistance ?

some ingredients

Distance , velocity & acceleration of swings
is number one ( resistance is always being met )

Old highs and lows .. but the amount of work diminishes their influence
so the diagonal line and not so much the horizontal ( work does things , not time it just passes)

Congestion zones ..very important here horizontal is relevant.

2% x 1
1% x 1
&
50Pt x 1

We can use various ways to scale a chart
eg standard deviation

I think the best way is to let the chart objectively scale itself

complexity is a change in detail with change in scale
Detail Here = changing relationship between the horizontal and the vertical
In Charles Dows statement....The creating of diagonals
In Wyckoff's --- causes and effects

motorway

motorway

20th-December-2008, 02:43 PM

This is the largest Congestion Zone
ever seen on the S&P500 dyor

ie if this is a base it is the largest base ever built..

( It is work that lays a foundation
not time passing and twiddling thumbs.
MOVES COMPLETE .... TIME JUST TICKS
clock time is predictable but useless for forecasting
intrinsic time is not predictable but can be used to forecast)

The spike down is a very positive sign
= absence of any(?) supply at those level

prices always(?) fall below the point of accumulation
prices always(?) rise above the point of distribution
quote from 1898

motorway

tech/a

20th-December-2008, 03:59 PM

M/W I notice the massive amount of effort both horizontal and vertical in your XAO charts at the 4300 area.

motorway

20th-December-2008, 05:34 PM

M/W I notice the massive amount of effort both horizontal and vertical in your XAO charts at the 4300 area.

Yes , very powerful forces

There is high volatility in the lengths of columns and the number of reversals
The chart is two dimensional = a mean reverting process , a very dynamic one

So the mkt is wide and fast

and there is no point looking at smaller box sizes ( the detail esp in terms of reversals does not increase unlike now )

The last accumulation will be done in a dull and narrow mkt
We have trends because "events" have memory
With such destruction we do not expect to see a stop and reverse
What we will see is an end to supply
and then ( even if it is well above the low point )
a very dull period.

Remember the first fall in August 2007 ?
People saw that as a buying opportunity
mkts just go up--memory

We could say that a normal bear mkt
has been compounded by the huge credit seize
hence what maybe could have been a bottom
was never going to be a bottom

IF a P&F chart is not clear
Condense the action further
eg move to a 3 box reversal chart

large mean reverting structures
are where the work gets done

The work of creating a value zone
or a no-value zone..

To buy (or sell ) near these structures is
what is meant to buy low and sell high

In P&F it is how to define potential oversold or overbought

Active or Dull
is as important as patterns of congestion

eg a 25pt x 1 chart even with EOD data
is meaningful atm

Pattern is about ascending or descending
tops or bottoms

here is the 2% chart as a 3 reversal
We can look left at old support
We can see that Dec is only three boxes down ( becoming dull )

Compare with the earlier congestion
the descending tops too...

Also see how the mkt went above
the point of distribution ( memory + leverage )

It will go ( Has gone ? ) lower than the point of accumulation
same reasons esp leverage :)

Usually the months will crowd together
at least two
at the start of a bull mkt

narrow and dull

A Sneaking Bull
born in gloom

The swings of a pendulum
are forced moves
A strong move means strong moves

You can not force a dead centre

The swings of the mkt have memory
a Bull mkt has to begin in gloom and end in glory
People have to be in at the top and out at the bottom
Borrowed to the hilt etc

Just different ways of saying the same thing
tautologies

Your experience with market profile
should give you a good understanding
of what a congestion zone is
and what things like pole reversals reveal

With P&F it unfolds in it's own time
So active and dull
are very important

In modern exponents this
seems forgotten.

My opinion prove disprove etc
Bottom is in
small cap growth ( revealed by low gearing )
to out perform
dyor

Its 1974 My Opinion

Blue line also defines a "zone of fear"
Dullness and SOS to watch for +
reversal formations

motorway

motorway

20th-December-2008, 06:11 PM

Think

If you were charting a sequence of coin tosses
( and did not know it )

When you reduce the box size
The number of reversals would not change
Only the columns would become longer

eg half the box size ( so your box size is half a coin toss )
The columns become twice as long

But the reversals stay the same..

When you increase the box size ( so you condense two tosses to one )

Both reversals and the length of columns reduce in the same proportion.

In both cases there is no increase in detail
in the first there is a loss

There are no waves here
None that can build up or down

No accumulation No Distribution
No forced moves

No---flow of information
No diagonals

25pt X 1 chart

Too simple but
what (who?) creates the reversal volatility--events --information ?
who creates the length of column volatility - followings -emotion ?

What makes a trading range ?

what is here atm ?
Information and less emotion.

motorway

motorway

27th-December-2008, 05:52 PM

Box counting is a way of sampling an image to find the rate of change in complexity with scale, as well as measures of heterogeneity or lacunarity.

The basic procedure is to systematically lay a series of grids of decreasing calibre (the boxes) and counting the number of Boxes for each successive calibre. Counting is how many of the boxes in each grid had any part of the detail in them. (The important detail here is the Xs, the "unimportant" the grey background).

Heterogeneity or "lacunarity" literally refers to a gap or pool ( The unfilled spaces in the patterns )

Market Heterogeneity means that the impact of an event does not play out immediately in the market, but slowly dissipates at different rates . The initial reaction to an event is followed by series of secondary reactions (aftershocks)

Market participants are different. To anticipate disconnects between buyers and sellers (discontinuities in liquidity and, therefore, pricing), the likely responses of these different players to price changes and other events must be analyzed discretely.

Some quotes from the general literature on fractals
last two from Richard Olsen

Point- You can read Mandelbrot & Peters etc and you read some interesting theory without any application....In fact some suggestive dead ends (imho )
With Olsen You do get some good suggestive pointers to application ( very good insights )

And , then ? There is P&F

10 pt x 3 XAO chart

The chart scales itself (It builds down)

Every trade leaves a footprint; managing risk is about reading this path.

Pricing flows originate in momentary micro-bursts of volatility that kill liquidity and displace pricing.

The better you can gauge this displacement, the smarter your next positions.

This quote from Richard Olsen

compare to Richard Wyckoff

Bear in mind that a decisive price movement cannot be expected to
occur until there is evidence that the forces of supply or demand
have been built up, and then become unbalanced, sufficiently to
generate a sustained swing.
Therefore, take care to analyze the
behavior of an average or a stock while it is forming these
congestion areas to make sure that such formations actually do
signify accumulation or distribution.

A W Cohen gave this possible formation the name of

A Bearish Signal Reversed
"The first six columns of this formation display the classic pattern of
lower tops Although it starts out looking exactly
like a Bearish formation, an unexpected price reversal takes
place in the seventh column. The buy signal is given when the first
prior top is penetrated. According to A. W. Cohen the momentum of this straight upward reversal in the seventh
column usually carries far enough to yield a substantial profit.

There is an expectation that the force of selling which is producing persistently lower highs will complete a rout of the buyers at some point. But when the bearish signal suddenly reverses, it has all the hallmarks of a bear squeeze. A.W. Cohen found this to be one of the most reliable point & figure chart formations. A properly constituted bearish signal reversed has at least 7columns."

XAO is in the 7th column ( an up column )
A W Cohen founded Chartcraft
(P&F as a trading system double tops etc )

Bear in mind that a decisive price movement cannot be expected to
occur until there is evidence that the forces of supply or demand
have been built up, and then become unbalanced, sufficiently to
generate a sustained swing. RDW

The trading behavior of diverse market participants assumes characteristic patterns. Olsen

Conventional (clock time imo ) analysis is too coarse-grained to reveal anything other than large-scale trends that are speculative and unreliable. Olsen

Because:)

"inasmuch as....you ...understand the market. You will think in waves."

Only For Discussion and interest:)

This pattern will resolve and reveal
in it's own time

But this pattern also has a context and position
and also gives context
eg to the "long tail" ( chartcraft)

corrected spike with absence of "work" at the bottom ( pre chartcraft )

motorway

motorway

4th-January-2009, 07:47 PM

So is anyone interested ?

If not :)

What happens ( the Xs) and what does not happen ( the white spaces )

reveal the demand and supply dynamics

and inform us how to scale the chart

OK

There is position ( in terms of the geometry ---How far )

There is velocity ( how fast )

and then there is acceleration ( rate of change of how fast )

velocity in a sense is Kinetic energy
acceleration is in a sense potential energy

how so ?
If we throw a ball into the air
as it reaches the top

What is velocity and acceleration doing ?

and why is it doing it ?

HOPE ( think of what hope does-- Tops tend to be a process )

If we throw a ball over a cliff

What is velocity and acceleration doing ?
Just before the splat !

FEAR ( what does fear do.... Bottoms tend to be an EVENT-- that is The Bottom the actual tic )

Trend lines measure velocity and acceleration

The 45 degree lines are Objective Forecasting lines

the lines drawn from pivotal points
are Natural trend lines ( much more appropriate term than subjective imo )

The case for The Bottom is (imvho :) ) much stronger..

empty spaces
inform us that forces
of a larger scale
are active and impacting on the scale we are observing

Also to be considered are velocity and acceleration in terms of

Active and Dull ( seperate often overlooked subject )

So a XAO chart

with some classic
trendlines

Note the empty spaces ( air pockets ) at the top
Note the tight formation current

P&F is a wonderful study (imo)

It is very wrong to think it is a derformed bar chart

( chart of only price disregarding time and volume )

And ( truely ) We ( I) have only scractched the surface here !

motorway

tech/a

4th-January-2009, 08:47 PM

M/W

What are the numbers on the chart and the Bars to the right.
What part do they play in your analysis?
It appears with the 45 degree lines that we are at an important point now?
Why have you labelled it 1

motorway

6th-January-2009, 10:34 PM

M/W

What are the numbers on the chart and the Bars to the right.

Months of the Year --- 1 is Jan through to 9 is Sep
A is Oct B is Nov C is Dec and 1 is now Jan 2009

What part do they play in your analysis?

A very Important part see the two charts

It appears with the 45 degree lines that we are at an important point now?
Yes, Very possible major Turning Point

P&F has dynamic time scale = the intrinsic movement

The charts really do have velocity and acceleration.

Because the waves of buying and selling do !

A sneaking Bull is exactly that
note the 2005 chart The months prior crowd together
Some months can not even get posted

The waves have receded -- built down
( so look at a 10pt chart like I am now )

Look at the spacing of the months current...

What drives a wide fast and active market and what does it facilitate ?

What drives a narrow slow and dull market and what does it facilitate ?

This is tape reading
P&F is a record of the dynamic of the tape

It is the actual voice of the tape ( The market )

I will update the 10 pt chart later
We have had a good move up from the congestion
and now are at important test

Also Time is important in comparative studies
and Relative Strength Studies..

There are (only ) waves of buying and selling

They have a price range , They have volume , and they have Time ( as Duration )... They reveal what we need to know ...

All you know about what you call VSA is same principles as P&F

eg looking for absorption on the 10 pt chart

Because the chart has an objective scale ( squared grid )
relationships remain as we zoom in or out
The trend lines do really measure acceleration and velocity

congestion is really congestion etc

A Wyckoff trader ( at least this one ) uses P&F like you use EW
in conjunction with VSA....

principles like impulse confluence etc very similar..

motorway

motorway

7th-January-2009, 09:26 PM

The pattern form the 2003 lows is a very significant and strong pattern
Dupire ( back in the thread ) gives such a pattern a 90% probability of moving higher...

Ok to the 10 pt chart why now

so far

The volatility on the large scale
is the container of the volatility on the smaller scale

Trends last as long as counts are generated, activated and fulfilled

These charts will reveal
when the "waves" build down (RDW)
and we should follow the action down to 50pt 25pt 10pt
even 5pt charts

Box counting is a way of sampling an image to find the rate of change in complexity with scale, as well as measures of heterogeneity or lacunarity.

Empty spaces
inform us that forces
of a larger scale
are active and impacting on the scale we are observing

Ok 10 pt chart Now
with count/ objective of the pattern 3750 ( Fulfilled )

10 pt chart as previous eg in Sept

Empty Spaces !

This is first 10 pt pattern to make sense
waves have built down now they will build UP

( magnitude not direction )

The three Wyckoff Qualities

range volume time

need to be judged by the 4th

Position
this = the close of a bar
or the last box on the figure chart

HLC
There is no open

because the open is only at the start

That the price of a stock reflects or crystallizes everything known about or bearing on from the first sale on the Exchange (or Prior) up to the present time.

The present is the close on the last bar you are looking at
or the last box that has been posted/filled

bar chart effort vs result ( volume in vertical dimension )
figure chart cause Vs effect ( horizontal dimension )

Both are tools to analyse
the four qualities
of the WAVES

Trade Moves
Not time frames
why trade 10 pt moves
when there are 100 pt

Why look for 100pt moves
when there are only 10 pt ones

When looking to go long
watch Esp the Down waves

motorway

motorway

10th-January-2009, 03:37 PM

A couple of Books to consider for those interested in P&F

Books that get into the How of reading a chart
( demand supply... Story of the tape unfolding )

and I think a good starting point ( these are older books )

I think they should be Should be read in this order

1)
DeVilliers and Taylor on Point and Figure Charting
by Victor DeVilliers and Owen Taylor

This is the two volume set
reproduced By Donald Mack ( it is not the 1933 booklet or later abridged versions )... Was expensive but I see it is now available in paperback.

Victor de Villiers was a close associate of Richard Wyckoff . De villiers became a P&F purest.

Where RDW thought (insisted ) they were both ( + Bar charts ) of equal importance .

2)
Second book is technically out of print
but new copies seem always to be available
and should not be expensive.

Study Helps in Point and Figure Technique by Alexander H. Wheelan

----

S&P500 chart 2% x 1 reversal

The chart itself defines the work has it unfolds as either Accumulation or Distribution

ground gained
ground lost
congestion & thrust/stride , active ( speeding up ) dull ( slowing down )
trend & reversal

action. reaction... depth of reaction

ceilings floors , angle of movement.. empty spaces
etc

As the Chart "flows" it reveals the changing technical position ( that it is flowing through but also creating, eg like a rivers relationship to the landscape )

A person watching the tide coming in and who wishes to know the exact spot which marks the high tide, sets a stick in the sand at the points reached by the incoming waves until the stick reaches a position where the waves do not come up to it, and finally recede enough to show that the tide has turned.
This method holds good in watching and determining the flood tides of the stock market.

What the waves do and don't do. ( eg look at the counter moves/reactions )

Important point to grasp is the chart does not have to move
and never sideways esp sideways
the action at the top
the action now

sideways is always risk to something and someone
and new opportunity for someone else

sideways in particular reveals a changing technical position

eg in de Villiers the analysis of the 1929 top...

that is why ( It can and does stop )
P&F is a superior map of volatility

motorway

Market prices move in jumps,
where physical time is a poor measure of significance

motorway

10th-January-2009, 04:30 PM

For instance see the number of (Xs) postings in the S&P500 chart ?

( and their changing behavior but esp the number & width )

The year 06 to 07 ! 07 to 08 and 08 to 09

Ok very different to a BAR chart ?

Now read part of this research paper from SVQuant

Silicon Valley Quantitative Advisors (SVQuant) is a proprietary trading firm located in Silicon Valley, California.

Our technology is based on proprietary techniques that are based on over a decade of intense research

2.2 Market Time Data
Traditional and commonly used forecasting models and many technical analysis
indicators assume equally spaced data on a physical time scale.

This is not an
ideal situation since it has been shown from the intra-day and intra-week analysis,
performed by others (Olsen & Associates Müller 1990) and High Frequency Finance
(Levitt 1997), that there are certain times of day or the week that are more important than
others. ( Market Time tm )

Market Time lets the actual traded instrument determine what the time scale is.

This allows the
time scale, measured in physical time, to expand and contract based on market activity.
A
forecasting model or technical indicator will update itself more when activity is high and
less when it is low.

This expansion and contraction allows techniques to adapt to the
market by adapting the data fed into them. Making linear methods in Market Time
actually nonlinear in physical time since the mapping form physical time to Market Time
is nonlinear.

This idea in not new ;), and has been proposed by numerous authors going
back to Mandelbrot and Taylor in 1967 and more recently has been used by Dacorogna et.
al. (1993) and Ghysels & Jasiak (1995).

To map from physical time to Market Time we enlarge the active periods and shorten the
less active periods. Volatility and other proprietary measures based on price are used as
the definition of activity for this transformation.

SO ???

Well this is P&F charting

So why do it ( and why from 1881 did people do it ) ?

SVQuant Find :

We demonstrate that by using this
new data series in technical trading indicators and rules the performance of these
techniques can be greatly improved.

This improvement is attainable to both model traders
or to traders that use technical analysis as part of the decision making process.

In the daily data realm we extend the principal of Market Time Data under the constraints
imposed by many end-of-day data users. Using three different trading techniques we
demonstrate that Market Time Data can improve the bottom line performance by
increasing returns and reducing drawdowns.

motorway

motorway

16th-January-2009, 03:03 PM

We demonstrate that by using this
new data series in technical trading indicators and rules the performance of these
techniques can be greatly improved.

Among their findings ..For example making use of support and resistance ..

They conclude with a very strong statement

Summary

Market Time Data can improve technical analysis at intraday and daily frequencies

Improvements in trading can be made by changing data alone

Should look at changing data before looking at switching techniques

IE-

Standard Methods and New Data
vs.
New Methods and Standard Data

Eg Support and Resistance on a Point and Figure chart
vs Support and Resistance on a Bar Chart ( or anything else )

Remember their market time data = intrinsic time
= the flow of the P&F

OK... The old books are valuable because the fellows who wrote them
were not just writing about the misbehavior of markets

But were The Misbehaviour itself and sought to profit from it..

They knew all about intrinsic time because they were "tape readers"

Activity and Volume unfolds
It only misbehaves when seen in terms of the ticking clock

( when you use VSA what are the focal points VSA ;) = tape reading too )

Some charts

Shanghai
S&P

Thrusts
halfway points ( and halfway points of those etc )

( law of proportion )

The 45 degree movement
( law of 50% )

congestion + empty spaces=
pattern ( some nice apexes )

active -dull ( coming or going eg alighting like a feather on support ))

All this is implied ( and often stated )

even way back pre 1900

http://books.google.com.au/books?id=atQFpbkiKbIC&pg=PA42&vq=foundation&dq=game+of+wall+street&source=gbs_search_s&cad=0#PPA42,M1

page 42&43

motorway

motorway

8th-February-2009, 02:20 PM

Looking for Shanghai to breakout Monday

on the 100 pt chart ( valid upside targets )

Also the 50 pt ( white spaces make patterns more powerful
because they point to larger scale forces ) to look inside the 100 pt

RIO too after all it is a Shanghai Stock also :2twocents

dyor :)

motorway

motorway

8th-February-2009, 02:57 PM

That pattern on RIO
is a strong one...

We do not filter to conceal but to reveal

We have levels of magnification
because there are scales of magnitude

We can filter by price , by volume and by time

In P&F, though it appears that price is filter

It is really the flow of prices ( traded prices ) that is the filter

Hence time is what is really being filtered

We duck when the punch is thrown regardless of the timeAll things alive are non linear

The secret to anything is knowing the correct time..
When the forced moves unfold

Markets continually get into positions of forced moves
At the right Time they just fall over or soar up

This Time is non linear

Volume and flow ...

I saw on another forum the linking of TA to signal processing
moving averages as low by pass filters etc

But it was all linear... No one using the techniques would ever duck until after the punch was thrown and in most cases LANDED..

Yet a punch is a forced move it has a preparation it Unfolds...

like standing a ruler on its end all it can to is fall over
just like the Stock market did.
When the time comes ... The non linear time >>

Many applications of signal processing deal with processing an input signal and producing an output signal

eg a Bar Chart or a Point and Figure Chart----Then various indicators derived from these

eg Trend line - Moving average

A common scenario occurs when a signal is transmitted through a channel which corrupts it with noise. Consequently, the receiver must attempt to reconstruct the original signal as closely as possible from the corrupted one.

In general, this is a difficult problem, especially if the receiver has no knowledge of the signal or noise characteristics or statistics. However, in many practical situations, the statistics of the noise are known.

For instance, if it is known that the noise is modeled by an additive Gaussian process, then a linear filter is known to be optimal.

This optimality result is one of the primary reasons that linear filters have been a primary tool throughout the history of signal processing. Other reasons for this are that linear filters are well understood and they have some elegant theoretical properties. Their simplicity follows mainly from the linearity property.

Besides this, linear filters offer acceptable performance in many situations.

Linear = fixed time scale = a Bar chart

Nevertheless, in many instances it is impossible to find an acceptable linear filter, such as when noise is non-additive or is non-Gaussian. ( Stock Market ) For example, it is well known that linear filters can remove additive high frequency noise as long as the signal and the noise do not overlap in the frequency domain.

Sometimes the "noise" is the signal.

In signal processing , the signal often contains meaningful high frequency components, such as edges and fine details ( turning points major & minor ).

A linear lowpass filter, ( A Bar chart a Moving average on a Bar Chart ) if applied to such a signal, would blur these sharp edges and details ( coarse lag ) thus producing unacceptable results, so nonlinear filters must be used.

Price distributions do not follow the expected Gaussian bell curve but are fat tailed with dramatic variations four times greater than “what they should
have been.” And for extremely short intervals of time price extremes were
even larger: up to 10 times the predictions of the classical model. ( Richard Olsen )

Non-linear = dynamic time scale = a Point and Figure chart.

motorway

I have adapted this from this link
A good description of non linear filters

http://personal.systemsbiology.net/ilya/NONLINEAR.htm

noise is signal / signal is noise
depending on the Time

motorway

8th-February-2009, 05:19 PM

page 39

http://www.mta.org/eweb/docs/Issues/08%20-%201980%20May.pdf

page 33

http://www.mta.org/eweb/docs/Issues/51%20-%201999%20Winter.pdf

Surprising close to accurate history of Practitioners
and how close the connections

Ancient babylon (:2twocents ) Green(e?)/Hoyle/Klein/Wyckoff-----------------------------> Sexsmith / de villiers--------> Taylor----> Wheelan

And others forgotten whose efforts have been reinvented.

Also Edmund Tabell ( Richard Wyckoff's Grand Nephew )---> Anthony Tabell----- >Kenneth Tower

http://www.time.com/time/magazine/article/0,9171,811089,00.html

on to the moderns as mentioned in the thread

eg Richard Olsen scale of markets shocks in intrinsic time..

Why did it evolve as it did ?

because it never strayed away from the reality of the tape
When the tape moved There was a mark to be put down
when it did not there was NOTHING..

After enough marks recorded there was the voice of the market ( Wyckoff's CM )
Recorded in it's intrinsic time and rhythm

Really the Song of Composite MAN ..

Wyckoff Went to work in Wallstreet 1888 So any attempt to understand
the practise or the history of P&F (or a lot else )
without understanding something of Wyckoff and his method

Is very incomplete imo.....................

What people understand as P&F is a particular trading system..
And even here 3 box reversal charts and even the use of X and Os date way back

As charts from the 1920's reveal

motorway

Many years ago my attention was directed by eminent market authorities, to the merits of points and figures as a logical, basic and true method of recording stock price movements. From such records, the resulting harmonious patterns, and the indisputable evidence of countless past performances, it was claimed by these respected authorities that here indeed was to be found a dependable clue to the future price path of American securities so eagerly sought by investors and traders all over the world.

For the purpose of developing a logical aid to market operations, I tried other methods and consulted practically every known writer, guide, and authority in the financial field at that time. These efforts were finally rewarded when at last the Point and Figure Method was developed to such an extent as to be one of the most valuable aids of my vocation.

In my professional work of writing about, and advising on the subjects of investing and trading, I relied upon a fund of knowledge derived from reading, studying, and practical trading experience.

A long and intensive study of points and figures as a basis for methodical operations followed. The more I investigated their merits, the more convincing became the proof that price movements do not "just happen." I soon found, to my delight and amazement, that this method filled the need for short and long term market operations. Here, at my disposal were sharper tools, precision instruments, dependable laboratory methods. Here was the solid basis of scientific method upon which hundreds of millions of dollars had assuredly been staked, over and over again, in the quarter of a century or more preceding my introduction to the method. Like Archimedes, I was able to say "I have found it!"

The Point and Figure Method, as a plan or background for investing or trading operations, is herein described in its theoretical phases and practical applications. The subject is capable of endless discussion, illustration and variation. Your time will be spared, however, for I hope to compress the gist of the method into this work. I desire to provide the student with this new working tool, which should enable him to operate, as do the insiders themselves, profitably and intelligently.

This method, if properly understood and mastered, should go a long way towards fortifying the serious investor or trader in his commitments, and preventing recurrence of the losses of the 1929-1933 era.

It was never necessary to accept such a defeat in finances or morale, marketwise, as the majority have experienced in the last major cycle, which had two distinct phases and culminations--the climax of June 1932,--and the anti-climax of March 1933. Both were anticipated by the Point and Figure Method.

The Point and Figure Method is complete in itself. If no other data or guide to market price movements were available, or if the selection of a single plan as the basis of anticipating stock price movements became imperative to the exclusion of all others, I would earnestly recommend the serious consideration of this inside Method as most reliable.

Accept then, this well-tried and proven guide and Method, with the author's endorsement of its practical value. It is a substantial segment of the sum and substance of tested practices in price path appraisement. It is highly valued by men, organizations, institutions and interests who know its worth.

Victor De Villiers 1933

De Villiers chart from early 1930s

motorway

15th-February-2009, 02:08 PM

METHOD IS SUPERIOR TO INSIDE INFORMATION
Since it is the purpose of all market analysis to determine the balance between
the forces of supply and demand, we seek a means of accurately measuring those
forces.

Whether demand be on the part of the well-informed insiders, stock
sponsors, manipulators, or the consensus of opinion; whether it be one or more
of the foregoing groups, or whether it result from sufficient outside public participation,
it will bring about the same results on our Point and Figure charts.

By means of the use of the Point and Figure Method, anyone who will devote sufficient
time to the mastery of its principles can place himself in possession of the
knowledge that will put him on an equal footing with the influential forces,
whether they be insiders or outsiders.

No basis for a movement in any stock can be completed without leaving definite indications in its price path together with
their logical implications as the action of the stock traces its movements clearly
on our Point and Figure Charts.
Victor De villiers

RIO

1 x 2% chart

Both log and Linear charts have their advantages ( and differences )

The two moving averages are just a way of measuring

The increase in detail with increase in magnification

ie ... This 2% chart reveals more information than the 4% chart does

Some De villiers pointers on his 1930's chart above

SUPPLY EQUALS DEMAND
The full fulcrum develops at the point where the center of gravity shows the balancing
of the forces of supply and demand.

A down trend channel formed prior to the fulcrum point indicates that the
supply of stock exceeds the demand. At the fulcrum point, the forces begin to
balance. After the first rally where the reaction holds above the previous base
level, equilibrium is regained and a new up trend channel is in process of being
established.

Here, demand begins to overcome supply, and a catapult point
eventually develops. At the catapult point, demand has overcome supply, and
the advance to substantially higher levels begins.

What both charts show
is that supply was overcoming demand
to the extent that prices tanked

Finally demand meets supply and there is a climax and liquidation

( The 2pt chart maybe clearer.. But the majority sold out at the low prices )

For every seller there is a buyer

So in a few blinks the technical position totally changes..

Why--> because it can not go up, is not going up to go up

Till after "they" sell

It is difficult to over-emphasize the importance of studying the technical position, particularly when making a speculative commitment.
Richard Wyckoff

“One of the few flat statements you can make about the stock market is that any price trend will eventually be carried to excess.”
P&F Chartist
John W. Schulz

The RIO chart

reveals

That

Equilibrium has been regained and a new up trend channel is in process of being
established. Here, demand begins to overcome supply---

Victor De Villiers

This is the first touch of the upper channel since the actual top .

process of being important to note.. nothing certain all is flux...
But How many of the best 10 days of gains have been missed from the top ?

These 10 days that if you miss you never make up ?
The chart says that a lot of people hung on so as not to miss them
only to sell out at the lows... What good did it do them ?

Wyckoff teaches that the most important thing anyone can know about a market or an individual issue is its trend and the position that it occupies in the trend. The trend is the line of least resistance.

Inportance of the empty spaces

Prices flow like a river/creek

Around from and to them...

''Here, demand begins to overcome supply''

well we have to find that out :)

motorway

motorway

21st-February-2009, 05:21 PM

ONE POINT CHARTS SHOW ALL
The one reversal changes, as they register on your charts, reflect all of the buying and selling.

When such price changes have completed the pattern, the picture thus formed is the best sort of inside information, since it may be indicative of an impending up move or down move, as the case may be.

When your three reversal charts confirm the conclusions reached by a study of your one reversal charts, you will then have corroborative proof, and your judgment is thereupon confirmed.

Should the implications of your one reversal charts be confirmed by the
three and also by the five reversal charts of the same stock, then you may consider your knowledge absolute and definite, and you must act accordingly.

Be ever alert and study at all times. Remember, the patterns which are traced
on your charts result from the action of individuals. Your chart discloses the balance of all influences.

It tells you what is taking place and when to prepare for the move as well as how to take advantage of that information.
Victor De Villiers

The further back you go in the history of market analysis
The closer you get to pure demand and supply

Looking at the markets of yesterday, today, and projecting that look into the future, it is evident that markets themselves do only three things after taking into account their basic buying and selling functions.

Their products rise in price, they fall in price, or they move sideways in price. If these are the only three things that they do, then in a nutshell we have the answer to what to concentrate on in market analysis.

We dissect and study every price, volume, and time action using whatever knowledge we have to analyze each price rise, each price decline, and each sideways movement.

This gives us the most meaningful direction to follow in our analytical efforts and takes us to the highest levels of Analysis. We will also find that behind a great deal of classical writing is this same focus, analyzing physical aspect after aspect of every rise and every fall.

When we take a close look at the classical period that ended with William Dunnigan's One-Way Formula for Trading in Stocks and Commodities in 1957, there is one common thread that links just about every technical work produced.

That single thread was that their analytical methodology dealt directly with the reality of physical price, volume, and time. For better or for worse (and this writer says "for worse"), the emphasis on reality of past years has given rise to a great deal of emphasis on fantasy today. Price, volume, and time are the only physical realities

Donald Mack

Update on the Shanghai charts

looking for this to keep leading the way

The whole theory of supply and demand is briefly but clearly shown.

The principle is old; it is easy to
understand. Very few people apply it.

Richard D Wyckoff

THE WEIGHT OF AUTHORITY BEHIND THIS METHOD

METHOD WEIGHS FORCES OF BUYING AND SELLING

The Point and Figure Method actually measures the forces of supply and
demand, and records the support and resistances at all points. It permits of a
wide range of visualization through its lucid, graphic records which allows
quick and ready comparison of one stock with others and with the market in
general, as reflected by a good index and, most important of all, with its previous technical action.

These records, if properly compiled from reliable sources,
will indicate the true trend of the market and of stocks, and will point out the
best trading and investment opportunities.

The Method indicates when and what to buy. It also cautions when to get out, first, through clear signals to act, then, through definite indications for the logical placement of stop orders. It teaches you to adopt a professional approach to your market transactions. Professionals may be considered as the insiders, pools, independent operators, stock sponsors, bankers, and others usually referred to as "they" by many market commentators.
Victor De Villiers

Anyone reading de Villiers work will see a lot of Wyckoff in it
and really nothing very far from the reality of demand and supply.

Even so Richard seems to think Victor went to close over to the dark side
of mechanical patterns ( fantasy )...
With his Fulcrums and Catapults :)

Ground gained ( demand ) Ground lost ( supply )
Ground Held ( support ) Ground withheld ( resistance )

length of thrusts
length of reactions

Equilibrium gained or lost

What is winning ?
What is waxing , what is waning
emerging or retreating

Demand Supply

"The whole theory of supply and demand is briefly but clearly shown.
The principle is old; it is easy to
understand. Very few people apply it."

motorway

motorway

2nd-May-2009, 07:36 PM

RIO too after all it is a Shanghai Stock also

update that RIO chart

and also post the 2 box reversal chart

When the dynamic TIME is up, price movement will start and large volume will begin, either up or down."

As long as a stock is declining one unit per reversal either one, three or five or falling below or under the 45 degree trend line, it still is in a bear market and in a very weak position.
When a stock rallies and crosses the angle of 45 degrees after a strong decline. Then you are ready to put the angles on the other side of the 45 degree angle. Which shows that the stock is stronger in a bear market and may be getting ready to change into a bull market

A Basis for a forecasting Method

Broadly speaking, one can say that if the market does not show any movement, Olsen regards time as standing still, whereas if there is a great deal of movement, he regards it as moving fast. In emotional time, then, a second does not always last the same length of time, as it does in physical time. It is this concept of emotional time which allows a much more precise observation of market movements, and which above all allows exaggerated movements to be identified and quantified much better.

Here is a P&F chart..... It is strong also from the TOP ( there are no overhead 45 angles from the top.... THERE are lesser angles though and with P&F they show up on the (2) 3 (,4, & 5 ) box reversal.....

quotes from the gann thread

A trading method should be as simple as it can be.

motorway

tech/a

3rd-May-2009, 08:17 AM

M/W

Would you be able to post a chart showing a few trades from inception to completion?

Ive never seen one traded with P&F.
I dont know how you would apply P&F analysis to a trade and never seen it done.How you'd analyse an opportunity through to managing the trade.

Would be interesting to watch if you could add some commentary.
Thanks M/W

motorway

3rd-May-2009, 07:32 PM

Analyzing the XAO with a 75 pt chart atm ( remember earlier I was looking at the 100 pt )

We can then compare other candidates and objectively determine Technical postions

stocks ahead or behind ( in terms of buying and selling waves )

You can see for example RIO compared to XAO ( I am currently long RIO )

IF you look at the XAO chart you can see the chart is at a balance point

( one way is the line with the 2 in it if we break the phases up we have 5 boxes across / We are Five boxes High from that point )

So as posted in the Gann Thread XAO needs to move above resistance
or move back down for an optimal buy point

The thread should be full of P&F charts
But it is not

I left the thread with two books recommended
( They are good introductions )

All My entries are Basic Wyckoff

eg A Last point of supply after a Sign of Strength

You can not have an uptrend unless there is a reversal on a P&F chart
which not trapped in a time frame will be Timely

And does not move unless something moves it

motorway

tech/a

3rd-May-2009, 07:49 PM

sails

3rd-May-2009, 07:58 PM

motorway

3rd-May-2009, 08:05 PM

Thanks M/W.

I guess I should have a good look at Du Plessis which I have.
Have you adapted Wyckoff to P&F?
OR
did Wyckoff see P&F as "The" chart style for his method?

I note the VSA guys have removed P&F from their software.
As P&F was designed for recording 'ticks" I guess it can be used in anytime frame.

Wyckoff Used P&F on all time frames

With intra day he traded off P&F with volume (based on every tick & Tick Box size)
"Tape reading chart" ( I can send you an example )

Du Plessis is OK covers a lot

But he knows very little Wyckoff
And a few holes ( that are important )

P&F was never just a breakout method
Du Plessis has one page about buying underneath the pattern for example

Wyckoff used it for larger time frame ( SMI course )
as a tool to define objectively every stock of interest
it's trend /postion in the trend / capacity for a move --which way

Larger time frame he used Bar chart and P&F equally
and made the point you could trade of either alone

There is a VSA seminar that had a lot of Wyckoff in it ( Pruden was involved
it might be still available )
and some P&F and a promise to incorporate best P&F in a new tradeguider

( So scan P&F for setups like Wyckoff did )
Also determine Market strength or weakness from aggregating all the P&F charts..

motorway

motorway

3rd-May-2009, 08:14 PM

Thanks for the post, MW. I can understand some of it... :)

When you say "rise above resistance", I assuming you mean it has to cross above your 100% line. How many squares does it need to rise above to be a valid cross?

First it has to cross
Then it is what happens

Any "work" at that point ( sideways movement ) and move down is negative
A thrust up and down is just part of a larger base building

Sideways but hold the gains is bullish and would want to go with move up from that point

A break up of THREE BOXES
would want to see the space retained from the breakout

very bullish

McClarren ?( talks of Spacing Gann )
Difference between a true and false catapult

Good spacing is Bullish sign

guidlines only
All is manipulation

motorway

tech/a

3rd-May-2009, 08:24 PM

Got it.(I actually do!).

You use a P&F package with a search type programme is that right?
I havent seen anything that searches P&F charts.
Surely you dont do all that labelling and numbering manually!

motorway

10th-October-2009, 01:46 PM

Anyone interested in P&F
and other methods of complete reality .

And The Scales Of Market Shocks/OlsenScales
are P&F CHARTS ( 100 of them )

Will be interested in this

http://www.olsenscale.com/about/video_archive/

esp the 5th and 3rd videos
And as an intro the 1st

4th is interesting too

How so very much
Something that is old . IS very new too..

Time frames distort ( and worse ), hide reality

Through

Distraction -->Getting lost in noise (clock ticking when it should not)
& Oblivion ---> Missing the significant.. ( clock not ticking faster when it should )

The challenge -->Move away from Clock time to Intrinsic time

To Event driven Reality where the velocity of Directional Change ( P&F Box size & Reversal ) and Overshoot....
Define Intrinsic Time---> Market Time----> Completely Real Time..

Re read the quotes from the 1930's of De villier's/Wyckoff
& compare

The Point and Figure Method actually measures the forces of supply and
demand, and records the support and resistances at all points. It permits of a
wide range of visualization through its lucid, graphic records which allows
quick and ready comparison of one stock with others and with the market in
general, as reflected by a good index and, most important of all, with its previous technical action.

These records, if properly compiled from reliable sources,
will indicate the true trend ( because now we are in Intrinsic Time ) of the market and of stocks, and will point out the
best trading and investment opportunities.

Should be many P&F charts on the forum
Because They are unambiguously
Completely
Real

Real = what has efficacy

completely --> Speaks for itself

Richard Olsen , and others , have come to their version of P&F
Through correct theory
Tape reader's came to it empirically

Both are RIGHT 100% in their choice of tools

When one deals in Intrinsic time ( and that is what deals with us in ALL ASPECTS OF LIFE )
One Finds that
The many things that people spend/waste ( WORRY ABOUT ANXIOUSLY :eek: ) time on in trying to crack the markets ( or LIFE )

Do not even exist..Let alone are in any way important

:):2twocents:)

For Discussion

Where is the REAL ?

What is real . What is just mere artefact ?

--->

---> conventional time series analysis, focusing exclusively on a time series of regularly
spaced observations, is far removed from both the fractal viewpoint and the real nature of
the raw data

is far removed from the THE REAL....from TRUE TRENDS...
from TRUE SUPPORT and RESISTANCE..

Every Column = an EVENT ( it matters
= A TREND
EVERY REVERSAL is an EVENT = SUPPORT or RESISTANCE it matters

No Event
Never Matter
No Matter
NEVER MIND

Only the Real, counts :)
It has effect
It is an EVENT

-->and of course there is ALWAYS more ;)

What does FRACTAL mean
It means when we remove Time Frames
All markets are basically the SAME
& all (effective) SCALES are the same

and ( controversly ? ) Are traded basically the same

Scaling Laws -->SCALE
They are invariants

It is only
conventional time series analysis

That obscures and makes differences that are not there
By distorting intrinsic time ( reality )

motorway

Timmy

11th-October-2009, 01:38 PM

Good stuff Motorway; yes, Olsen's videos are almost a text on PF charts! Thanks a lot for the link to those.

motorway

22nd-October-2009, 02:54 AM

Good stuff Motorway; yes, Olsen's videos are almost a text on PF charts! Thanks a lot for the link to those.

Nothing beats the move based.
Bruno Dupire

· Is there an answer? (yes) Digitalize the financial system !
Richard Olsen

Example: trend scaling law
trend of 1% will on average continue for another 1%,
trend of 2% for another 2%.
Scaling laws establish definite frame of reference for financial modelling.

Directional Change = Box Size
Over shoot = movement in excess of Box Size

Richard Olsen's Trend Scaling Law ( one of 17 ) ( is like an old P&F rule )
It states that when a reversal occurs "on average" a further move = to the reversal amount will continue before another reversal back to the original direction...

So what becomes important ?

Any divergence

eg The one BOX step BACK
or A THREE BOX REVERSAL

As you suggest Timmy
Olsen
Dupire
Mandelbrot
etc
have all written P&F texts
whether they Know it or NOT...

Some slides from Dupire

Which converges to reality ? Moved base ( P&F) or time based ?-->
= distraction & oblivion= Distortion of the PRICE CURVE

Financial markets are fractal : statistical properties are self similar.
When we remove Time Frames.

See the price Curves below ?
See how sampling in tIme
removes us far from those REAL PRICE CURVES ?

conventional time series analysis, focusing exclusively on a time series of regularly spaced observations, is far removed from both the fractal viewpoint and the real nature of the raw data

time = Duration is IS important
Volume = effort is important
and PRICE the actual PRICE CURVE is Important

and Intrinsic Time ?
It Eats Things

Motorway

Sam Collins

19th-November-2009, 05:29 PM

hey guys,

I've attached(thats right! ATTACHED, iT WORKED!!!) a PF chart of the ES, its a 0.25x3 chart, now could someone put their interpretation on it, for example, would you look at this the same as a bar chart in the fact that, the...erm.."column" that is highlighted with my vertical line on the attachment, is that the PF version of demand drying up, is the volume still relative...or AS relative maybe as a bar chart? and things like points 06:11-06:33 on the chart, that is resistance? the 4 points, 4 green X's, then the breakout, I'm trying to interpret how to ACTUALLY trade off this method, its weird following pure price movement, after watching time based charts.

I insist on mastering this PF method, I haven't touched it for ages, I've been flat out with work, but hope to learn more about it more. Its fascinating!

motorway

19th-November-2009, 07:57 PM

Sam Collins

19th-November-2009, 08:23 PM

Hi Sam

Good to see some charts

I will certainly make some comments

It would be good to see a one box reversal chart too

Maybe a .50 X 1 ( seeing .25 is the min bid )

esp with the Sort of trading you are doing

That way we can coordinate between the two charts
and 1 box reversal will give us more detail of the dynamics of the tops and bottoms...

The three reversal chart really connects the areas of congestion.. This is very important..

Motorway

great motorway, was hoping you would turn up :)

Ok here is an attached chart of the 0.50x1(its a diff colour, didn't have my template on the first one). it shows more detail, so the top that I was questioning, on this chart show nothing volume wise, right on the top there @1109.50, does this mean no interest there? hence why its drifted off?

motorway

20th-November-2009, 03:03 AM

Might take a while :)

Lets Start

Ok We know what a P&F chart is How it moves etc ( important )
We know that it is a picture of the action of the price coastline and is the dynamic of that coastline ( Watched live you would know what I mean..It stops starts speed up slows down as it meets resistance )

Ok .5 x 1 This is a Box size of 1/2 a point with a reversal of one
Price has a certain probability of being in a BOX and moving out of a BOX

That the mathematical laws governing the Unit Chart (P&F ) are Independent of the Size of The Unit adopted
~ 1926

An Event Driven Chart Which moves when demand and supply moves it .

Every Column of more than TWO BOXES is a TREND
When RESISTANCE IS MET The trend ENDS
IT will SLOW STOP and REVERSE FORMING a NEW COLUMN That will move in the oposite direction , in this case DOWN until SUPPORT IS MET etc

Up and down ALTERNATE as Demand and Supply assert inturn and reassert.

So Every column is testing of demand and supply
Every column is responding to demand and supply

We can see at a glance that some columns are longer than others
They make more Ground and Give BACK less GROUND ( or more )

So each column is a test and response
makes Bullish and bearish statements
not only in the static aspects a frozen Coastline of past battles. But also in the dynamic aspects Of HOW LONG and HOW FAST

and YES there is VOLUME --> Volume is activity.. participation EFFORT.

Price as Range is MOVEMENT

And TIME on the chart is SPEED and DURATION

OK

On the chart I have put some ( natural ) trendlines more later on these..
Now We don't have to draw them But we should think in terms of them for context ..

What Statements is Price making as We move from left to right ?

Trend is DOWN there is only One Green Column with TWO green Boxes

A TEST what is the response ?
Weakness

With a one box reversal chart We Would expect to see TWO BOXES in the same Direction in each column ( ON AVERAGE )
When we see a THREE BOX REVERSAL or A ONE BOX STEP BACK ( when we see a O & X in the same column )... We have Divergence , A Point of Interest to watch carefully for response ..

There are weak moves upwards . Just Step backs ( A step back against the trend VERY IMPORTANT POINTERS .. The OTHER SIDE IS THERE but makes no ground )
SEE the column with a X over Three red Os ?
That column and the one before ( test<--> response )

Make a very BEARISH PATTERN
We also see some Volume coming in
So We expect IF that is SUPPLY
There should be accelleration DOWN

Instead we get FOUR STEP BACK COLUMNS

( There are not TWO BOXES IN THE SAME DIRECTION )

THE ACTION NARROWS ( WE SHOULD EXPECT FROM THIS POINT A GOOD MOVE)

Which way from here ?

VOLUME COMES IN and We get just not TWO BOXES in the same Direction BUT FOUR.

The TRENDLINE is BROKEN ( WHAT BROKE IT ? Not TIME. But DEMAND It is a P&F CHART )

Ok After a move up We want to see IF SUPPLY comes in
and whatever Supply does come in We look to SEE if it is ABSORBED

A Stair Step Pattern FORMS
one of three accumulation patterns ( on the way down , In a Range , on the way up )

WHEELAN gave it a name does not matter ( Nine such names )

of DUPLEX HORIZONTAL...

And we should EXPECT ?

more later if you want.. :)

POINTS

TESTs AND RESPONSEs

Importance of THREE BOX REVERSALS and ONE BOX STEP BACKS

How Each COLUMN makes a statement about DEMAND AND SUPPLY
IS Demand and Supply

How Each column is an assertion which is seen as a test which the next column responds to:

It negates ,Rejects or affirms
and Then the next column will then reassert.

That SUPPORT AND RESISTANCE ARE ALWAYS MET ( That is what draws the columns )
We can see Demand-->
When the stride down lessons
When the stride down SLOWS
When the action moves sideways ( IT IS NOT TIME )
and TAKES the FLUCTUATIONS through the trend line..

We do not have to WAIT FOR BREAKOUTS to see DEMAND

Supply overcomes Demand
Supply meets Demand
( EQUILIBRIUM REGAINED )
DEMAND IS SEEN to OVERCOME SUPPLY

REVERSAL

NOW .
True Trend is the fluctuations themselves ( more latter )
Trend lines are only context which action may conform to

But again only demand and supply can break such a trend line

( There is also the movement along 45 degrees one of those
mathematical laws ~ 1926..

OK if positive feedback I will continue
The best way to learn P&F is to watch the chart flow across the screen
It is like having DEMAND AND SUPPLY on your very finger tips ..

Motorway

Whiskers

20th-November-2009, 03:41 AM

I insist on mastering this PF method...

I said that too. :D

Still trying! :o

motorway

20th-November-2009, 12:09 PM

I said that too. :D

Still trying! :o

Whiskers THERE IS NOTHING SIMPLER THAN P&F..

It is just two sides continually Pushing against each other other.

In BROKEN RHYTHMS , With players continually changing sides as EXPECATIONS
are formed--- And That is CAUSE AND EFFECT

SO far WE looked at The CHART from DEMAND AND SUPPLY

What do PRICES do when DEMAND oversomes SUPPLY ? When Supply oversomes DEMAND ? THE ONLY accurate REPRESENTATION of THAT is a chart in INTRINSCIC TIME eg a P&F CHART

THINK of a BOXING match you are only going to react to your opponent in fixed time units ... Your opponent is going to knock your head off through the GAPS with what seem like Broken Rhythms.

on The ACTION so far from Victor De Villiers -1934

DOWN TREND A PREREQUISITE TO FULCRUM FORMATION

The ideal full fulcrum develops after a down trend has been halted and the price path builds up a pattern which moves over in the trend channel from the lower trend line to the upper trend line as a result of a series of rallies and declines.

This action builds up a congestion area with a flat base. From this series of minor rallies and declines, two to five BOXES in extent, which halt within a limited range developing a flat base, a sharp quick rally occurs that may result either from short covering or actual buying which creates the sharp run-up because of the absence of offerings overhead.

This sharp advance is then usually followed by a temporary corrective decline which is arrested at a point above the low level established before the first run-up. Subsequent to the second series of rallies and declines, another sharp advance develops which must exceed the high point of the previous rally. The second high point, which is a full figure above the previous rally top, then becomes a catapult point.

Once the stock has developed sufficient strength to hurdle the catapult point, it usually and speedily develops a substantial advance to higher levels, and the reverse occurs when this formation appears near the top of an extended advance.

SUPPLY EQUALS DEMAND

The full fulcrum develops at the point where the center of gravity shows the balancing of the forces of supply and demand.

A down trend channel formed prior to the fulcrum point indicates that the supply of stock exceeds the demand.

At the fulcrum point, the forces begin to balance. After the first rally where the reaction holds above the previous base level, equilibrium is regained and a new up trend channel is in process of being established.

Here, demand begins to overcome supply, and a catapult point eventually develops. At the catapult point, demand has overcome supply, and the advance to substantially higher levels begins.

Simple Things often have great depth and are profound
So DOING is Best way of learning..

NOW :) Even INCREDIBLE CHARTS has P&F charting.. And There is always ( and good it is to ) PEN and PAPER:)

Charting a MUTI YEAR BULL MARKET or an INTRA DAY SESSION
INVOLVES THE SAME PRINCIPLES because we are in that intrinsic time that is real market time...

BECAUSE --->
That the mathematical laws governing the Unit Chart (P&F ) are Independent of the Size of The Unit adopted John Durand

Motorway

inrodwetrust

21st-November-2009, 07:38 AM

Here's a free e-book link of

THE POINT AND FIGURE METHOD
OF ANTICIPATING STOCK PRICE MOVEMENTS by Victor DeVilliers & Owen Taylor

updated with charts from Bulls Eye Broker. That might be worth a read. Covers the basics & some analysis of catapults & fulcrums.

http://book.pointandfigure.com

regards

just realised its the source of some of motoway's quotes...there you go then!.. hope you don't mind motoway

Sam Collins

21st-November-2009, 08:19 AM

It also states in that book that this method ignores volume. Interesting.

THE METHOD IGNORES VOLUME

The Point and Figure Method entirely dispenses with the recording of the volume of sales. Many have felt this to be a distinct deficiency under the belief that volume is a dominant factor. We are unwilling to concede that volume is the vital influence which, in the final analysis, governs the price movement. It is conceded, however, that volume is an influence when used as an aid in other methods. In our opinion, the Point and Figure Method has proven itself so much more reliable, that we are satisfied from our research and experience to conclude that the number of price changes and the manner in which they combine themselves have a more scientific foundation than the influence of volume in the anticipation of price movements.

Keep going motorway, I think I'm still following :D

Sam Collins

21st-November-2009, 10:55 AM

here is another one motorway, its a .5x1 chart of the SPI. the A B C D areas are parts I want you to describe if you can, the huge markup at A, what does this mean and how should it be interpreted? the 2 X tests on the push down at B, these would be good entries? price would slow on these X tiny up moves, momentum is down? and the narrowing price at C, and also the wide price action at D? especially D, why is it so wide and constantly like that?

thanks in advance :)

motorway

21st-November-2009, 01:12 PM

Ok A few points

hope you don't mind motoway Not at all , A good find and contribution.

On Victor De villiers --> He was from a very early stage associated with Richard Wyckoff.... Often contributed to the Ticker and Investment Digest ( magazine of Wallstreet )... In 1919 Wyckoff Published his book Financial independence at fifty ...

he later seems to have be quite close and one of the Original "ASSOCIATES"

In Wyckoff and Associates inc. Which was Where the Wyckoff Courses were housed

They had a fall out over technique .. Victor became a pure P&F chartist and it is his idea it should never consider VOLUME....

He also tried to formalize principles into names
FULCRUM CATAPULT etc... Wyckoff felt giving names was death ! It fixed things too much .. Wyckoff would rather ask What is trying to be achieved with this congestion zone and go from there..

Victor's Book is a good one and is as close to Wyckoff as you are going to get
outside Wyckoff....

When he Broke with Wyckoff he originally published under his own name in 1933.... He then teamed up with OWEN TAYLOR and Published a Three Volume more expanded edition...

The Book inrodwetrust has linked to is VOLUME ONE....

Owen Taylor Would later join up with Alexander Wheelan ( whose book again is a good one )

The P&F world is a small ONE...

NOW if you look at chart examples through the 1920's you will see Volume
being used...

Take Wyckoff's comment from 1908

It seems hardly necessary to say that an up trend in any chart is indicated by consecutive higher tops and bottoms, like stairs going up, and the reverse by repeated steps toward a lower level.

A series of tops or bottoms at the same level shows resistance. A protracted zigzag within a short radius accompanied by very small volume means lifelessness, but with normal or abnormally large volume, accumulation or distribution is more or less evidenced. Here is a style of hand chart especially adapted to the study of volumes:

When made to cover a day's movements in a stock, this chart is particularly valuable in showing the quantity of stock at various levels. Figures represent the total 100 share lots at the respective fractions. Comparisons are ready made by adding the quantities horizontally. Many other suggestions may be derived from the study of this chart.

He would continue to develop this ...

It became His tool of choice for intra day trading and is the Subject of the 1932 TAPE READING COURSE...

We can see why Victor says No VOLUME and for the trading He is doing WYCKOFF did not use Volume with the Figure Chart Either..

The BOXES are adapting to all aspects of the Trading..
The BOXES are PRICE VOLUME & TIME..

SAM I can see you are getting IT

You are asking the RIGHT questions

POINT: We all should see HOW MUCH CLARITY THESE CHARTS HAVE !

YES SAM when the chart slows down and becomes DULL
How much meaning then when it becomes active AGAIN ?

OK THERE are NO TIME FRAMES on the P&F CHART ( = accurate superior map of volatility = ZERO LAG CHART = ABSOLUTE CLARITY )

But there are different TIME HORIZONS

and This esp on inrta day trading is when VOLUME can be so USEFUL

Volume is a pointer to PRICE being WRONG
VOLUME is a pointer that those with longer time HORIZONS are becoming involved are or leaving ( STRONG and WEAK hands )

Time Horizons Shrink and Expand
This is related to CAUSE and EFFECT

and VOLUME can be very useful pointer
It is about ACCUMULATION and DISTRIBUTION

Much to Say about your charts SAM :)

Will continue

Motorway

motorway

21st-November-2009, 07:41 PM

Think of a contest Where I have to push YOU backwards and You have to Push Me.

AND there is continuous betting on how much ground either of us will make against the other..

And also We are not adverse to taking bribes and waiting for the "MONEY TO GO ON";)..

The P&F chart is a study in the FORCES ABOVE AND BELOW the current PRICES

THE P&F chart is a finely calibrated SCALE -- Which reveals the potency of those forces...

OK
The impact of events cannot be determined by measuring just the absolute price move, but has to take into account certain qualifying factors.

A straight price move--> an uncorrected column represents less impact than a corrected column of equal size occurring within the same time period.

A slow price move also has less impact than a faster move of the same magnitude.

Get this ?.. When we see a long unbroken column at your A . We ask where is the other side ? Is he really pushing ? or is he waiting for the "Money to go on" ?

Reactions against the TREND are NATURAL and HEALTHY...

We expect to see TWO BOXES on average in the same direction.. When We don't .. SOMETHING IS ON...

TEST RESPONSE... at your A price MOVES UP ,, An ASSERTION .. But SUPPLY immediately reverses the action---- THIS is VERY BEARISH

This is an UPTHRUST... or as SOME P&F terminology would call it a HIGH POLE.

IF I push You back and You are really seen to be trying
Then I am a GOOD THING

So a move up that shows consolidations and one stepbacks
IS a clear sign of strength ..

If I Push you back seemingly with ease
But you don't seem to be trying... Then We can not be sure till you show what you have got and you get off the sidelines..

A Swift move up like that IS a bullish sign
But We should see little ground given back...

Why should there be a 3 box reversal ?
or why should price react back more than 50% ? ( HIGH POLE )

On that chart after that BEARISH STATEMENT... Prices move UP
But look at the volume indication on the last Up column

This is a LAST point of SUPPLY
( Wyckoff ) There is a lack of demand

The action at A is a significant Sign of WEAKNESS
We know there WAS significant resistance at that point..

Even without looking at volume
We know we saw weakness

....

Just back to the early chart

I have marked TWO HOUR sections
DO you see HOW just the TIME ELEMENT
designates The TOP as an Important point from which
activity, when it comes will be revealing !

See also what I mean By Distraction and OBLIVION of TIME BASED charts

If We were using 5 min bars
This chart would look completely different

The P&F chart is an INTRINSIC TIME CHART
That Top on the P&F chart has it's due Width
as so all the phases of the action.

Increased Activity INDICATES an Early Move .. It is so important to watch for any increase in TEMPO of Price Change Activity .
Alexander Wheelan..

It is not the P&F chart that deforms Time
But the Bar and Candle Charts.

Motorway

Sam Collins

22nd-November-2009, 02:07 PM

So a move up that shows consolidations and one stepbacks
IS a clear sign of strength ..

could you explain more about these one stepbacks?

this is fantastic motorway, keep going by all means.

The part about time is really interesting, that means on that chart you posted, price slowed right down on that top, then dropped off, so when price flow slows, its showing no momentum in that direction? like the pushing contest, its not trying?

I have attached the chart I posted, but with 2 hour blocks on it, price was relatively slow when we had the upthrust, then took off, accelerated on the big push down. interesting :)

keep it up motorway, learning alot.

motorway

24th-November-2009, 02:11 PM

On Time
Sophisticated mathematical tools are employed to identify the behaviour pattern of the market components and analyse their reaction patterns.

One of the key elements of these forecasting models is the concept of “intrinsic time”, that is, time is rescaled according to the impact of events on market volatility. With intrinsic time, periods of high volatility are expanded and thus are more important than periods of low volatility, which are compressed
Richard Olsen

Sophisticated math tools --> just substitute P&F chart

time is rescaled according to the impact of events on the market You really have to understand this This is why every box on the chart is Significant..
it is Why REVERSALS are called WORK and Why that 45 degree line is important and has special significance..

Olsen again ( he is a modern day P&F practitioner :))

A price shock that lasts , for a brief period of time, has a very strong impact on market volatility. Then over a much longer period it has a very weak, but persistent market impact. This behaviour of dampening price shocks, but then a long persistence of weak after shocks, is a characteristic feature of market behaviour.

The market has memory,,, Now your High Pole is a PRICE SHOCK .. We look always left to it from that point.. Alex Wheelan
As price approaches such an area it is likely that there will again be supply encountered at that point. Therefore , it is often possible to buy on weakness at a price below this level on the first correction after a penetration of that resistance.. Price may move slow and congest as it approaches that point or it might accelerate and move past with no hesitation..

Ok ? so what happened ? We can see it happening ! We are watching the TAPE in intrinsic time...

Ok It proves to be an important juncture.. Now because it is not a eg candle chart but a P&F chart we look left YES .. But we also look along the 45 degree angle..

WHY is THIS THINK

Each box is a position maintained by demand and supply
Each box stays as long as there is demand or supply meeting. UNTIL one side is ABSORBED... The BOXES represent WORK ..

A BOX could form and if buyers and sellers keep trading a BOX could just sit there for a whole YEAR

THE CHART CAN STOP .. It does STOP while the WORK gets done and THEN it MOVES because the Work is being done again...

So as demand absorbs supply The chart moves characteristically on average along 45 degree angles slowing and pausing absorbing.. Then moving on.

Here we are talking about Cause and Effect

IT GOES up to build a CAUSE to go DOWN
and then it GOES down to build a cause to go up..

Two aspects TREND & TECHNICAL POSITON

Just look at that HIGH POLE ..

The 45 degree movement ( on average ) happens. Because it is a chart of demand and supply and not just a random process like a series of coin tosses..

SO when will the cascading
long persistence of weak after shocks, cease..

when the energy is exhausted and when demand as absorbed all the supply that has been mobilized .. some where along that 45 degree line the action will change.. The Behavior will change..

SO

always look left
Think in terms of natural trendline
and in 45 degree forecasting lines

The thing about the 45 degree lines are that they are
100% OBJECTIVE
and they PROJECT FORWARD

RICHARD OLSEN

Since the inception of classical economics over two hundred years ago, one of the most sacred assumptions has been the hypothesis that an invisible hand determines market prices and that market prices follow a random walk. Today, there exists significant statistical evidence that this is not the case and we need to acknowledge that financial markets are, indeed, predictable. How is this possible?

RICHARD WYCKOFF

It seems to us, based on our experience, that Tape Reading is the defined science of determining from the tape the immediate trend of prices. It is a method of forecasting, from what appears on the tape now in the moment, what is likely to appear in the immediate future.

OK I am connecting OLSEN to the P&F literature
But that is how I find it -->CONNECTED

The 45 degree line is an Equivalent of the Wyckoff "COUNT"

Now if we are using a BOX size TOO small then we are bouncing around in the bid ask spread.. If the chart meanders sideways for a long time that is also indicative of something about the participants

All aspects of reading the chart should be co ordinated..

BUT
The ACTION happening always matters the MOST
EVERY BOX is support and resistance RIGHT NOW..

One step back ?
is where you change columns say from X to O and the next move is another X
you have an O under an X in the one column THERE WAS A STEP BACK BUT NO CHANGE IN TREND..

THERE WAS NO OVERSHOOT

Think of a pendulum it swings down but reverses at the bottom
STRANGE ? SIGNIFICANT ! Clear sign of a force at work

SAM :) Like explaining what a banana tastes like.. It is SIMPLE but because it is real There is lots to say

And if you keep practicing You will discover so much
But the right words at the right time can be MAGIC..

Motorway