Learning to read Price Action with P&F Charting

Ok, I am going to add a new facet to our discussion. This is basically for swing traders only.

It's called the bullish % index.

I've created an index of about 800 of the highest volume stocks. If you have nasdaq stocks or nyse stocks that are readily available you can do it on each index.

Basically what the index tells you is whether you should be looking for longs in your trades, or mainly shorts.

Now I have mentioned that I use bulls-eye broker for this. I love the program. I am not affiliated in any way with them. I don't make a commission on their sailes etc. It is just the only program that is pnf that does it that I am aware of. It also as previously mentioned, automatically changes box sizes based on price of the instrument you are trading. A very nice feature.

I do know other people on this board do something similar, so maybe we can get some insight from others on where they get their information.

Personally, I believe it is extremely important to be with the market. A rising tide does lift all boats.

Normally any time the index gets below 30% it is considered somewhat bullish that we are at or near a bottom.

When we are at 70% we are at or near a top. Personally I think anything over 60% is time to become cautious on your longs.

What this program does is scan the stock and looks for the last pnf signal. If it is bullish then it gets added to the bullish percent index.

It is recommended that you never add to your stocks while there is an 0 column as the current column. At least wait for a reversal before going long.

If you see any kind of breakout on this bullish chart it is even more bullish. If there is a breakout under the last column of 0's then it is extremely bearish to go long.

The key is not to add to your longs when we have an 0 column and not to add to your shorts when we have an x column.

Here is a current through today bullish% chart.

As you can see, we are still in bullish mode so we should be looking for longs in our swing trades. We have crossed over the 30% line as of today which is extremely bullish.

I know the world is predicting doom and gloom, but the chart says NOT RIGHT NOW. So trade based on it.

 

Based on what I called the last file I guess it must be 2009, so Happy New Year to all.

 

Also, just in case Indahook does not want to provide guidance on low range days, I think we have to put our heads together here and come up with a system.

I will try to do some research on this, but it would seem to me that we have to incorporate some kind of range guidelines because days like this will kill you. It is my biggest weakness, and it is criminal that the only way I get around it is to have "max loss day".

 

You come up with some of the most fascinating uses of P&F charts I've ever seen Mr. Grail.

Or should we just call you "Holy", as in "Holy cow, what's he gonna come up with next?"

Thanks a ton for sharing!

 

I would love to take credit for it, but it's Thomas Dorsey's idea.

 

FWIW, using yours and Howard's concept of triple top breakouts (only on the ES .5 x 3), and only taking them with the trend (as defined by pivot relationships as seen on the P&F chart, with HH & HL for longs and LL and LH for shorts), there were 5 set ups today, all of which yielded 2 pts., if using a fixed target, and more if you used a trail.

9:48 S
10:32 S
11:06 L
12:13 L
11:34 L

It looked like a decent day on the ES .5 x 3, but I'm just a neophyte with these P&F methods.

 

Howard,
I have a friend who works down at the CBOT and I get some stuff from him from some SP traders he knows. In days like these they do not trade, as it was the case today.
Of course if you cannot afford not to trade for a whole day then it's a different story, but then again these are the days the mkt will take $$$ from you.
He tells me I should not trade in days like these and I listen to him most of the time.



Thanks.

 

Great thread HG & others.

Could someone discuss trendlines a little more. I understand they are drawn at 45 degrees, but from what point (x,o) do you draw them?

thanks

 

See the third page of this thread.

Most software that display pnf charts do not keep the columns in correct proportion so it may be difficult.

 

just adding my compliments,HG, for this educational thread.

i had put up a PnF chart a month or 2 ago - only when i discovered my ts2000i had the capability lol. i review it frequently, trying to understand what it's saying. now, i will understand much more. 1 thing i had played with, was the auto trendlines that come w/ TS.. looked like a viable tool. i'll be following your thread, and thanks again.