How to make a diagram Point-and-Figure and technical analysis to take advantage of chart trading?


How to make a diagram Point-and-Figure and technical analysis to take advantage of chart trading?
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11/30/2022


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Diagramming Point-and-Figure, At this point, we must have started to learn how to create a point and figure diagram on chart. The equipment needed to create a diagram is a graph book (Which has a square grid used in childhood when the teacher asks you to graph it.) But some people might say that nowadays there are computers. As well as a program to manage diagramming, Points and Figures, why do I still need it? (Is it obsolete? ) But in our opinion, Understanding the basic principles would not cause any damage. To have understanding and expertise first, then use a computer to help create a diagram later. It should be added to the user. More proficient and believes that the computer-generated diagram sometimes difficult to consider Because the image is too small for those who have used graph books to create diagrams. There might be some way to solve this problem.

The first step in creating a diagram It's about setting the size of the box (box size) that each box is equal to how much. The easiest way is to set a box size equal to the price change or spread in stock trading. For example, if the stock price is between 5 euros and 80 euros , the box size will be 5 euros , which is equal to the change of price when trading stocks, etc.

However, in practice, the box size is set at the trader's discretion. To be able to lead can be used for analysis effectively But there is a little reminder that the size of the box size will affect the sensitivity in change in price direction If the value is less The change in direction will be faster. Therefore, choosing the size of the box size should be related to the range used in the study on chart for trading. For example, if wanting to study price movements in the long term, choosing the size of the box size is should be larger than usual, etc.

The second step should be to understand how to enter prices into the table. As well as the rules that need to be known to create a diagram in order to understand the rules. Including the rules along the way Take a look at the following example.

Suppose that the stock price is now 15 euros, we record the value of 15 euros, but not as a numerical value, but instead using the X or O symbols. After the price of 15 euros, the stock price moves in which direction because the symbols X and O have different meanings, that is, if the price moves up, then the symbol X is assumed. That the price moved up to the highest price level of 40 euros and closed at this price level as well Will we really get 6 more X symbols? (Example picture) Because each box used to record the X value has a box size of 5 euros, so when the maximum price changes to 30 euros, the amount of X that has been added. So there are 6 of them.

On the other hand, if the stock price falls from the price level of 35 euros to the lowest price of 10 euros and closes at this price level, the symbol O will be used to record the value. (sample image)

Arrived at this point lets us know that Which symbols are used in which cases? And for ease of explanation, I would like to explain in case the stock starts with row X first, assuming that the next day the price is still rising. With a maximum price of 65 euros, we don't have to do much. In addition to further record prices up to the price level of 65 euros.

But if the highest price on the 3rd day does not exceed the highest price (65), for example, at 65 euros, we must turn to consider that. Is the Day 3 Low below the High (65) for at least three price movements? In this case, assuming a minimum price of 55 euros is not less than three periods of price change. Which is worth 10 euros here, just sit there without recording anything.

On the other hand, if the lowest price on the 3rd day is at 15 euros, which is below 65 euros, down more than 15 euros, in this case, start recording the O symbol in the column to the right of the X column starting. Record in the box that is one box below the highest price box X, as in the example of chart image above.

You are probably wondering what 15 euros used as a criterion. Where did the change of the X symbol to O come from? Indeed, it is a popular rule. This rule is called Three-box reversal, derived from the value of three times the box size, which from the above set the box size equal to 5 euros, so Three-box reversal is equal to 15 euros, but if anyone wants to change the rule This reversal can be any value other than 3 times the box size, but it should be looked at. Once changed, does the diagram that emerges have any significance in considering price movements? Or provide a price pattern that produces a buy or sell signal at Is it reliable or not? If it works better No one would forbid it!

In addition, another thing you can notice is In low and figure recording, there is nothing to do with the closing price, it follows the point and figure principle on chart in which only the highest price is taken into account. Only with the lowest price.

But if on day 1 we are now in column with O instead of column X as above, this is due to the drop from 60 euros down to 45 euros and if the lowest price on that day 2 is 15 euros, we continue to record the symbol O down to 15 euros. However, if the lowest price on day 3 is 15 euros, which is not lower than the lowest price (15), it must be considered that Is the highest price a Three-box reversal? If the highest price on the 3rd day is 20 (still less than 15 euros), nothing to do, but if the highest price on the 3rd day is 70 euros, then the reversal begins. In recording, it changes the symbol from O to X, which starts recording in the column immediately to the right of column O and begins in the address field. Higher than that of the symbol O record up one channel (As shown in the example picture)

However, sometimes the price dynamics are quite wide, for example, the high on the 10th day is higher than the high. Something currently recording on day 9, but looking at the lowest price on day 10, it's worth more than three-box reversal if the rules are followed. Would continue to record the number X until the maximum achieved on the 10th day, regardless of the resulting minimum, but if it did so It may seem to ignore what might turn out to be a significant reversal signal. And then move the column to the right To save the symbol O or perhaps use the method to save X until the highest price. And move the column to the right and save as a symbol, use fish to go down Instead of using the O signal as a warning that Significant reversal occurred. Appeared during the day.


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