In this issue:
Point and Figure Charting
Contributed by Remould Robert (Remo), Director and Founder of www.chartsview.co.uk
Point and figure charting is a popular charting method used in technical analysis. Point and figure charts are used because they are distinctive in terms of their analysis and construction, unlike other charts, time does not play a big factor. They are plotted on a grid and are made up of O's and X's. O's are used when the price moves down and X's are used when they go up, each box on the grid will be used for O's or X's.
Prices movements are plotted on the vertical axis (y axis) and direction changes are plotted on the horizontal axis (x-axis), prices are scaled on the vertical axis. A box represents the number of points that you have selected. When the price goes up then you would mark it with an X but only when the market price rises completely through the box then you would place an X in the box, so every full box size will generate an X.
For O's to be generated the price must reverse a minimum of 1-box (1-box reversal) but most commonly used is a 3-box reversal, which requires the correction of 3 boxes before the O's can be plotted. This will help filter out most of the noise so time is not really a factor. Once in the trend the next X or O will only need 1-box move to register on the chart whereas a reversal will require 3-box move in the opposite direction to register. That's why it's called a 3-box reversal. It's up to you what setting you want to use, for example you can use a 5-box reversal but remember this will take a lot longer to see the movements on the chart. Therefore, the usual preference is the 3-box reversal and this is the most common one.
Another way to change the setting will be the price move itself e.g.
The following table will help you to decide what box sizes to use, you should really try and experiment with different box sizes to suit your share.
As can be seen from the chart above when prices reverse the X or the O is not in the same column. Every reversal will start in a new column and it must reverse by 3 to generate a reversal. For example: If you are plotting a 5 by 3 (5*3), 5=box size and the 3=reversal.
If the latest box to be filled is 300 and the price rises to 305 then you would place another X in the 305 box. If then the price rises to 309 then you would ignore this, as it has not moved by 5 points. If the price suddenly moves to 323 then you would place an X up to the 320 mark (310,315,320), you would discard the 323 price as it has not moved by 5 clear points.
If the price then turns down and moves to 313 you would still not plot any O as it has not corrected by 3 box sizes. For a new set of O's to be plotted the price must move 5*3=15 points, the current high is 320 - 15 points therefore 305 will be the level before a new set of O's can be plotted. Remember every box is equal to 5 points so once 305 is hit then you would plot an O in 315, 310 and 305 hence a new column of O's. All the above is based on intraday moves as most point and figure charts are done on intraday.
End of Day
There are different time frames you can use with point and figure. End of day point and figure is plotted exactly like the intraday point and figure but only the closing price is used. So it misses a lot of the intraday moves, a bit like the line charts where all the important levels will be missed. See chart below for end of day:
This method uses the whole days moves so you use a lot more data, it totally ignores the closing prices. This method has the advantage that you can read the supports and resistances levels much better and clearer, see chart below for example:
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How do I apply a template to a chart?
Contributed by MetaStock Support
MetaStock 12 has made applying indicators and templates to a chart easier. This support tip will focus solely on applying a template to a chart. Templates give you access to preset indicators and systems, enhancing your charts. A template can be applied as a chart is opened from the Power Console. Here's how:1) After selecting an instrument, click "next".
2) The next screen to appear is the Chart Options. Select "apply template" and choose the desired template from the list.
3) For this example, we chose the Darvas Box template.
A template can be applied to an open chart by right clicking anywhere on the chart. In the popup menu, select "apply template." Select the template from the list and click "open."1) Right click anywhere on the chart.
2) Select the template you wish to view and click "apply." This will automatically add the template to your chart.
3) For this example, we used the Darvas Box.
LMS Trailing Stop Fixed %
Contributed by Breakaway Training Solutions
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