[Copycat]

@Motorway

Why are there only whole numbers for price in an a wave chart? This way only waves made by whole numbers are visible. Units of price is 1. So for example:

44, 45, 46.

There should be less waves if the units are bigger then 1 (44, 46, 48) and more waves if the units are smaller then 1. Theoretically it can be even made continuous.

Does this al even matter?

My ohter question is regarding the time frame. There is still one time frame when using P&F. The starting point and ending. Where do you need to start? Is there a special reason to choose a particular starting point?

Or should i just shut up and read at least something about P&F before asking silly questions? :p

I apologize for the bad English.

[motorway]

With Wyckoff There are three Types of chart

The vertical line OHC chart
The "Figure" chart P&F
& Then the wave chart

Why are there Whole numbers ?

We live in a Digital Age. Where all sorts of streams and structures are turned into digital

Units of 1s and 0s.. This is very useful ...

Figure Chartists entered the digital age in the late 1800s
converting the stream of transactions into digital units of up and down.

When the unit is changed the resolution is changed
As is frequency and amplitude ( like bit rate ) and time..

The figure chart is a non linear digital filter

The question of scaling is important and serious

We need to understand what happens ( what is revealed ) when we modify the BOX SIZE
and/or change the REVERSAL...

And how charts of different scale co ordinate with each other

IF the box size was equal to the the bid ask spread the chart for a full market cycle
eg 2003 to 2009 would be enormous . It would be a valid chart ( only if our data supported this resolution though ) But only useful for trading moves of that Box Size relevant scale.

P&F is a good teacher ... We always trade moves .. not time frames

The Figure chart is the CAUSE AND EFFECT CHART

NO CAUSE NO EFFECT.... More important than EFFORT AND RESULT

Think on this, Wyckoff measured Cause by digitizing the swings in the trading range
He did not measure Volume --> Change of Hands --> But change in Expectations .

How do you scale the Figure chart... One way is to scale in relation to trading range amplitude .... The trading range of interest at the scale you are operating on

Another way is to have a universal scale to use as a screen for opportunities to explore

Another way is to determine what particular scale the most information is unfolding on
( yes we can do this ) eg Is large scale volatility containing the small scale.. Or are new emergent trends arising form the smallest waves..

Is light a wave or a particle ?

is it continuous ?? Are the waves of buying or selling ?? Or at bottom are they more like a series of explosions ...

Does this matter ... Yes and No because the Coastline is always the same.. Just depends on what scale we want ( Scale not time frame , We trade MOVES )

The starting point is the first trade
The ending is the last Box

The "Background" or context is everything in between


However the various phases and points of interest ( prominent features of the coastline )
where Cause is generated and expended... Are natural starting and end points
"CHAPTERS"



OK ... For the Fractal Doubters... IF Wyckoff had that word available he would have used it. His writings reveal he knew all about scale invariant...

Now what do you do with something like a coastline ?

You cover it with BOXES to compute the BOX counting dimension
A measure of complexity or Fractal Dimension..

OF roughness of ( what are the MOST important features of the Figure chart--RDW ? )

CONGESTION...

A figure chart does this automatically
We do not need to work out how many Boxes make up ( cover ) the Coastline ..

We just need to count them and observe them---> Because they reveal ( They do not conceal )

A Figure Chart... never has to move and never has to move sideways ever.
Here is part of its "secret" and why it is different.
movement always means something
movement is WORK

Figure chartists and Wyckoff were very fond of Mechanical and Physics type analogies

eg "we find many interesting and constructive analogies" RDW

"The Forces of supply and Demand can be compared to the mechanical forces of pressure and tension" RDW.

Wyckoff used one point charts as the standard for stocks that were not too high or too low
But knew that often we would have to use a different size Figure chart when warranted.

motorway

Here is a chart of the DJIA it covers 100 years
Box size is 2000 points

We can see that the DJIA on this scale is in a trading range ( Anyone trading moves on this scale )

Now is there more useful information at higher resolution ?
We will have to see as we approach this Coastline from such a great height

But there it is in its structual integrity .
If we zoom in,,, We will find that Fractal really has meaning
and that the Coastline is the same Coastline ALL THE WAY DOWN.

Such are some of the static aspects of "" FIGURE CHARTS "
There are also the Dynamic

M

[Eiger]

Originally Posted by motorway »

...A P&F chart follows the waves of the market as they travel
Through Time Frames .The P&F chart is not trapped in a time frame..
...

A wave from the Wave Chart represents a figure(s) on the P&F (and vice versa), but few understand this point.

Nice to see you here MW.

[motorway]

Hello to Eiger and Atto &Tape and everyone else

OK The 2000 pt Dow chart ---> Who has tried to interpret it ?

It is a One Box reversal chart... A chart of the immediate trend

The immediate Trend at this scale ...

The trend is up with the Second Box , THINK ,To define the immediate trend
We need two consecutive BOXES in the same direction.

Consider a chart drawn from the tosses of a fair coin ( This is very important to consider... We use this chart as a manipulation detector )

The minimum Run is HH or TT ... HHT what is the trend ?
HHTHH ? HHTHHHHT ? --> all three the immediate trend is UP

On The ( entire history) DOW chart there is a move up of 6 boxes

This "coin" has flipped 6 heads in a row ( Question is this a fair coin ? )
There is then one box back ( NOT A CHANGE OF TREND ) DEMAND reasserts and then there is a RISE of 3 boxes

We have had a 8 box move without a corrective counter trend
But a step back ( like a test ) With demand reasserting.

( If this was a FAIR COIN , You would expect a Run of at least 6 Boxes only 1.6% time with a one box reversal chart)

There then is a REVERSAL SUPPLY OVERCOMES DEMAND
and There is a THREE BOX counter trend ( very significant, we could already condense this chart by making it a three box reversal chart.. The fact that it has reversed 3 boxes is significant )

And where are We ---> AT THE HALFWAY POINT.... And not only, BUT where Demand was seen to reassert At a POINT of PREVIOUS SUPPORT

------

Support and Resistance--> Where is it . what is it .

A dynamic analogy is of a River...Where does a river meet RESISTANCE ?

WHEN it does what happens
When it break through ?
When it is turned back ?----

Read Studies in Tape reading

The P&F chart teaches us that "RESISTANCE"" IS ALWAYS up ahead and is always being met and overcome ( OR NOT )..

What are we interested in --> The Composite Man
The P&F chart is tied around his ankle... he is the one that draws the chart
he determines when the columns change ( SEE -->NOT ANY ARBITARY TIME SCALE )

----

I will soon post the 1000 pt chart--- WHAT WILL HAPPEN ?

eg If the chart was drawn from coin tosses how many more columns would appear on average ( so aggregating 1000 tosses instead of 2000 ) ?

What does it mean if we get a very different number with this DOW chart ?

A very good question is always -->How would a random chart behave ( hint --> while there would be congestion patterns there would be NO CAUSE--> The Boxes would have NO MEMORY )..

One more point the ground is as important as the figure
ie the empty spaces...The River flows as it does because of landscape

What does the "Figure Chart" flow through

Every BOX is a POSITION..
POSTIONS are made, maintained
and changed...


The chart is very simple
Simply PROFOUND

Much to Talk about

Motorway

[Eiger]

Originally Posted by motorway »

....The chart is very simple
Simply PROFOUND

Much to Talk about

Motorway

Yes, it is profound.

I think the times in which RDW wrote shaped his thinking, or at least his analogies. Machines and mechanisms were new then, promising a bright future. Freud - writing about the same time - has a mechanistic view of the personality. Perhaps today his analogies would be influenced by the 0s and 1s?

In the reverse order from where (I think) you may be going ...

A chart of yesterday's activity in the S&P eminis - the 1-point (1x1) Figure Chart (FC) Wyckoff used on many stocks. A fine resoultion of the coastline.

A chart of the 5-point (1x5) FC. Same coastline, stepping back.

---------

I haven't thought about randomness and probabilities with respect to FCs. I am quite interested to see where you will go with this.

I like this definition of chaotic - "a system that appears random but behaves according to a well-defined set of rules." The rules I think about have to do with cause-effect, effort-result, supply-demand, and now, up-down

---------

And speaking of up-down, a third chart showing the 3-point (1x3) FC with the Wave Chart superimposed. Facinating, isn't it?

Now, add an element shown in Tape Reader's chart and you have something marvelous, which, of course, Wyckoff saw so long ago.

Eiger

[motorway]

When something is both simple and profound ..

We will need many analogies to see all sides and possibilities..

The FC is a non linear digital filter

This is the perfect tool ( RDW wanted precision instruments )
Because sometimes the signal is noise and sometimes the noise is signal

The one box reversal is the foundation it is the immediate trend
It is always following the "line of least resistance" not in a time frame
But in intrinsic time ( wait for it ) WITH NO LAG...

We need no Moving average to remove periodicity to reveal trend
We need no bollinger band to see if volatility is contracting or expanding

Certainly NOT any momentum or rate of change indicators

The "Figure chart" is always revealing velocity ( ROC )
It is always slowing down and speeding up. Stopping and starting so as we can get on and off..

What is wrong with all those time based indicators ?

They are always non optimised

and they always LAG....
NO LAG ? But there are only whole numbers---->

"Why are there only whole numbers for price this way only waves made by whole numbers are visible. Units of price is 1. So for example:

44, 45, 46.

There should be less waves if the units are bigger then 1 (44, 46, 48) and more waves if the units are smaller then 1. Theoretically it can be even made continuous.

Does this even matter?"

Very good question . To expand....

Does it matter to your HD 1080P TV ?

This is a question of meaningful scale... With the 2000 pt DOW chart
From this distance ( scale , magnitude related to time horizon )

You would not see any movement that is smaller than 2000 pts

Think ! We are on the moon almost looking at a great river on the earth
At this scale the immediate trend is 2000 pts....

Eiger's charts-- Without scale or notation ?

His charts could be the 2000 pt DOW chart
and mine could be one session on the S&P emins

SCALE INVARIANT

Many of the indications, such as the extent of reactions, lines of resistance, etc., will be found equally operative in the broader swings, just as an enlargement of a photograph retains the lines of its original.

Preparation for a long advance or decline, as well as for the intermediate movements are numerous, is clearly apparent to those who understand the art of Tape Reading.

In judging the market by its own action, it is unimportant whether you are endeavouring to forecast the next small half hourly swing or the trend for the next two or three weeks.

The same indications as to price, volume, activity, support and pressure, are exhibited in the preparation for both.
The same elements will be found in a drop of water as in the ocean, and vice versa.

A study of the stock market means a study in the forces above and below the present level of prices. Each movement has its period of preparation, execution and termination, and the most substantial of movements are those that make long preparation. Without this preparation and gathering of force, a movement is not likely to be sustained.

RDW

With one caveat----At the smallest scale , at the bid ask spread ..There are
No longer smaller waves as building blocks there is No "FRACTAL DEPTH"

---

With a one box reversal chart the next box ( If random ) has a 50% chance of being UP or DOWN.... So we need two consecutive Boxes to define an up or down trend/wave or move = The immediate trend

The three box reversal chart is a special condensation , It condenses the horizontal aspect of the chart ( Hint---> Some of the Empty Spaces )
While retaining the same unit of RISK and REWARD..

It is the Intermediate Trend . It takes Four consecutive Boxes to define ( or change ) an Up or Down move ( Think of the coin toss chart again )

Four is twice Two ( The One Box Chart ).... You might like to think of what a Five reversal chart needs to define an Up or Down Move

* Non Linear
* No Lag
* Always Optimized ( at a particular scale regardless of time frames )

Please read the Wyckoff PDF of Figure charts, look at the construction rules.

Does Volume lead Price ?
Does Price lead Volume ?

This is the realm of effort and result...

( hint) There are two sides to the buy sell spread.( so ).Price and volume follow each other

effort and result are Effects

In the beginning is Cause

( more on this later )


The FC is the Cause and Effect chart. And a picturization of the TAPE itself
So it is a graphic of the LAW of Supply and Demand ( when demand overcomes what happens ? When supply ? )

Wyckoff is interested in the patterns of demand and supply
of conditions that lead to outcomes

He is not interested in mechanical patterns

The river exists as a river because of certain stable recurring forces at work ( Laws )

But We really can not step into the same river twice

( who said that ? It is very Wyckoff )

Our aim is to recognize conditions ( causes )
Not look for mechanical patterns

Before we move on to the 1000 pt chart

Here is the 2000 pt x 3

The intermediate trend is Up ( at this scale )

Question to consider -->Just what are these boxes made / filled / WOVEN with...

motorway

[motorway]

Markets are Manipulated
Participants do not passively observe something separate to them.

Participants Observe and Participate

Causing feedback loops & non linearity and also chaotic edges..

The BOXES on the FC are woven by Price Volume & Time

We need not consider any of these separately in order to utilize the chart

( compare Eigers chart & the 1000 X 1 chart )

The FC is an adaptive chart ... Boxes are filled at what ever velocity and with with what ever constituency that the tape determines

eg Think of the FC moving slowing with BOXES heavy with Volume versus moving with great rapidity and lightness ... The FC chart adapts to the action... This is the difference between intrinsic time and clock time..

Congestion areas build "CAUSE" by resolving differences of opinion and changing the floating supply...

one unit of cause produces one unit of effect

Hence in a manipulated chart ( ie as defined above , A non random chart )

There will be movements over a cycle ( accumulation ,markup, distribution & markdown ) where the aggregate reactions total 50% of the aggregate movement in the trend direction..

one unit of cause = one unit of effect---> the natural inclination of the chart
is to move in 45 degree diagonals ( This observation goes back a long way.. But is seen today in so called "Bullish'' and 'bearish" support and resistance
lines of what is known as chartcraft P&F.. Also consider Gann angles ( wrong sort of time )..

This movement has to do with the adaptiveness of the chart.. It can simple stop while differences arise and then resume when they resolve.. Moving in "Stair steps"...


RDW did not draw explicit 45 degree lines
But they are implicit in his quantification of cause and effect
and it is not a particular line but an inclination...

On these charts I have drawn some trend lines
determined by the action itself

There is only one way that a trend-line is crossed on a FC
The mere passing of time will not cause a crossing to occur..

The chart is a chart of EVENTS and RESPONSES
NO WORK---> no movement.
-

Ok Eiger's chart has the same dynamic as the 1000 x 1 chart

Interesting

We look for points of resistance
We look for reaction back relative to the half way points
We identify trading ranges

We observe the ground made and retained or lost ( what is increasing )
and when active or dull.

The 1000 pt chart has a series of step backs
A sideways trend a reaction back that allows us to draw our trend line


OK Hit a button there somewhere
have to Post the charts and more to follow

Motorway

[motorway]

OK

If the chart was a chart of coin tosses ( fair coin )
halving the BOX size would result ( On average ) in a doubling of the columns ( obviously the height )

The FC is also a superior map of volatility

What do the waves do ?

They build up and down ( magnitude not direction )

Sometimes the number of reversals will not change much
Because there are large forces at work
and the volatility on the large scale is constraining and containing the volatility on the smaller

Often ( when liquidity does not disappear ) There will be more "Information"
unfolding on the smaller scale ( Like this 1000 pt chart compared to the 2000 pt chart )

Obviously this is a manipulated market


On the 1000 pt chart
there are hollow spaces that the chart has flowed around

This today ( Fractals ) would be called the lacunarity....

It is a pointer to the fact that there are forces of a larger scale
impacting ...


We must think how markets are different today than in the day of RDW

( PRINCIPLES do not change )

eg decimalization & price levels

The chart itself will inform us what scale we should be looking at

( consider if when we had halved the BOX size . We only produced the coin toss chart increase of the number of reversals or less even )

The empty spaces are important in this respect too...


Many today are interested in fractals & chaos etc

Figure Chartists did not have the same terminology But They did have the TOOL..
(many spouting fractals today DO NOT )

On the comparison to coin toss charts
and probabilty of runs
and the different behavior etc

A series of articles in the Magazine of Wallstreet in 1926/27
examined these...

OK People might be getting the idea
That there is more to the FC than is obvious . Certainly much more than is found in modern descriptions

motorway