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New perspective on Point and Figure Charts
There is a new book on Point and Figure charting that perhaps will provide a bridge in understanding how the PnF charts work in relation to traditional line or time based charts.
Prashant Shah has published Trading the Markets the Point & Figure Way. The objective is to allow you to become a noiseless trader and achieve consistent success in markets. Mr. Shah is a prominent P&F analyst and has many Youtube seminars posted on various "noiseless" charting styles.
A couple caveats. He is from India and the examples he uses are Indian stocks. The charts that he uses are from his software program.
That being said, the examples very clearly illustrate the points that he's putting forth. The points are easily transferable to StockChart charts, for the most part. Also, he's NOT overtly pushing his software or any services. His software doesn't cover the U.S. markets. It's a wonderful text that I'd suggest it to anyone just starting to learn point and figure, and also to anyone that is conversant in the chart style.
He offers several new ideas and indicators and applies some traditional indicators to the PnF charts. I've suggested to him, through dm on Twitter, that perhaps he should contact StockCharts to see if he and they can work together to bring his methods, thoughts and style to the U.S. market. He sounded agreeable.
One of the fun chapters covers how to relate time based charts to PnF charts. He mentions some prominent patterns on time/line charts like the cup/handle and the big base break out. He mentions how difficult is can be to "scan" for some of the patterns as time often plays havoc on the scanning process. He shows how some PnF patterns equate with common line chart patterns and shows that the PnF patterns are much easier to scan for. This provides a starting point for further analysis for those who prefer to use line charts.
I note that Bruce Fraser and sometimes, Arthur Hill and Greg Schnell, have referenced point and figure charts as a good starting point for screens.
From the book sales notes>
A peek into what you will find:
• What is a Point & Figure chart and how to plot it?
• Basic and advanced price patterns with numerous chart examples, trading rules for all patterns.
• Simple and effective ways to identify trend.
• How to use P&F counts to arrive at high-probability price target.
• How to use traditional tools and indicators in P&F charts.
• High probability patterns to capture momentum stocks and sectors.
• Objective method to identify market outperformers using Relative Strength.
• A few indicators developed, by the author, exclusively for P&F charts.
• 20-years of Back-testing results of P&F patterns providing interesting market insights.
I'm just finishing up reading the book. I've been using point and figure for over a decade. I recommend the book, especially for the bridge it can provide to those more comfortable with time/line charts.
I've suggested adding an indicator he developed to StockCharts. Also suggested to both that he may try to crack into the US market by working together with StockCharts. It would enhance SC capabilities on scanning, and that would put his ideas into the US market.
I have read The Definitive Guide to Point and Figure: A Comprehensive Guide to the Theory and Practical Use of the Point and Figure Charting Method by Jeremy Du Plessis
I have read Point and Figure Charting: The Essential Application for Forecasting and Tracking Market Prices by Thomas J Dorsey
I have read Tom Dorsey's Trading Tips: A Playbook for Stock Market Success by Thomas J Dorsey and Watson H. Wright
I have NOT read Dynamic Trendline Charting by Howard V. Prenzel yet as it is $699 on Amazon
1. Dynamic Trendline Charting - Howard Prenzel
2. Trading the Markets the Point and Figure Way - Prashant Shah
3. Asset Allocation Techniques and Financial Market Timing - Aby and Vaughn
The Prenzel book, like the Aby and Vaughn book, is a supply and demand based entity. I'd check back on Amazon and Ebay from time to time. Patience usually has rewards (a lower price)
I do a lot of work with PnF, and would be interested to see your methodology.
I have one of the three listed in the Point and Figure Chart section there.
"Price Plot includes a small version of the OHLC bar chart for the ticker symbol in the background of the P&F chart."
It doesn't match up with anything very well.
As far as the other idea of overlaying the week with the daily, you could look at the other indicators that aren't moving average related. Like Aroon is in relation to time since high / low for the period so a 25 on the daily is a 125 to simulate the weekly. On most of the other ones you would need to adjust the interpretation. Like RSI is basically an Up/Down count so RSI 10 and RSI 50 are not going to have the same "overbought/oversold" levels. What may be 80/20 or 70/30 on the 10 may be 65/35 on the 50. Or something like that.