go figure
As I’ve written before, I’m not a particularly big fan of technical analysis or any of the many and varied charting techniques people espouse. That said, we are working with a proprietary futures trading company and some of the successful (non-algo) trading that they do involves point-and-figure charts. Although a trading algorithm doesn’t care about graphical representations, I wasn’t familiar with the technique and decided that the best way to understand it was to try to implement it, which is how I spent my Saturday evening …
The above applet re-uses the one I’d written previously in discussing simple stochastic processes. This time, it illustrates a point & figure chart below the regular line chart. Point & figure charts expose two characteristics: a “box size” (in ticks) and a “reversal” (in boxes). The applet allows you to vary both and then generate a day’s worth of random/synthetic data to view it. One of the nice features of JFreeChart is that you can easily “zoom” into a chart by dragging within the chart. I’ve disabled this in the line chart but you can try it in the p&f chart. (Note: you should right-click and “Auto-Range-Both Axes” before you generate new data or you’ll stay in the zoomed segment of the chart.)
Now that I think I understand the basics of point & figure charting, it will be interesting to see what an algo might do with it…
I have been using these charts for twenty odd years, they work, contact me on this.
Thanks, Bill. I’d love to hear any insights you might have on making effective use of P&F charts. Particularly as it might relate to using them as part of an automated trading strategy.