If you are wondering what is going on with the US economy, this puzzle piece from CNBC will fit in very nicely.Dunkelberg: You Can't See Main Street From Wall StreetWhat this is saying is that there probably is not a small business collapse in the works due to credit issues. Smaller businesses will simply wait until they see consumer spending before they bother to access credit.Personally, I am

Without getting into detailed specifics I thought I'd try to answer a recent question about the strategies I'm trying with my various robots.First, a bit of background in case this is the first post you see on this blog:I design software and systems for a livingI've been trading for years -- learning through the heart of the downturn.With that out of the way I'd suggest looking at one of my posts

Generally, I follow and prefer to trade the AUDJPY. It goes through unwinds from time to time as the bigger players suffer fits of risk aversion.For the last few weeks we've been bouncing back and forth between 77 and 80. On the way down, with all the gloom and doom blaring in the media, it feels like we must be about to fall off a cliff.It's difficult not to be scared. After all, anyone who

As suggested in my last post...As a side note, I'm planning to make opposing robots this weekend. They will trade long and short positions in different sub-accounts.I've put together yet another robot. It will trade the same currency both long and short in separate sub-accounts. I'll have to wait until Monday or Tuesday to activate it.A few points I feel are worth mentioning:I've been developing

I am following CNBC regularly (via their web site) these days. I see many of the pundits advocating panic and doom. I suspect they all want to be able to claim they were right when we finally do experience some type of pullback.However, these braying naysayers of doom really don't have much of import to say. All they really do is act as large forces on the emotions of market players. Everyone

Point-and-figure charts (P&F) is another way to represent the price charts that can be used in Forex trading. Conventional charts display the price as the linear function of time, which results in a demonstrative picture of how the market behaved during certain periods of time. But the problem is that the trader often doesn’t need to know how price depended on time, all he needs is to know what the prevailing force on the market is at the moment — bulls or bears, demand or supply. That’s where P&F charts come handy. They show the price changes graphically, independently on the time during which the changes have occurred.

For example, the simple point-and-figure chart could look like this:



The green X’s are the price increases (by some certain value) and the red O’s are the price decreases. A column of X’s represent an uptrend, while the column of O’s represents a downtrend. In each given column there can be only X’s or O’s. When one trend ends a new column starts. As you see, there is no time scale in this chart. Each column can last an indefinite period of time.

So, how are these point-and-figure charts drawn? To start drawing a point-and-figure chart you should first set two important parameter values of the chart — the box size and the reversal distance.

The box size is the height of each of the O’s and X’s in pips. For example, if you set a box size to 10 pips, each X will mean an upward movement by 10 pips, so a column of 6 X’s is an upward movement by 60 pips. The same would be correct for the O’s.

The reversal distance is the amount of boxes that should be passed by a price in a reverse direction for a trend to reverse (to start a new column). The most common reversal distance is 3. That means that on a rising trend (a column of X’s) a price has to go down by the amount of pips in three boxes for a new column (this time — of O’s) to start. For example, if you use a box size of 10 and a reversal distance of 3: the price goes up by 60 pips, you draw 6 X’s, then the prices goes down by 30 pips (that’s more than 3 × 10), you draw 3 O’s down starting a new column from the level below the last X. If the price would go down by less than 30 pips you wouldn’t have to draw anything new. Basically, after drawing an X or O you just wait for the price to continue going in the direction for a box size of pips or in a reverse direction for a reversal distance * box size of pips.

If we consider 10 pips box size and reversal distance of 3 for the image above then we can say that first the price goes up by 50 pips during the first uptrend, then it goes down by about 50 pips, then goes an uptrend for 70 pips, then go two equal bearish and bullish trends for 30 pips (exactly the reversal distance). Then a price declines by 50 pips, then goes up by 30 pips and finally falls by 40 pips. It ends at +10 pips (if you sum up all the values) and, as you see on the picture, the ceiling of the final O is 10 pips above the bottom of the first X. That’s exactly +10 pips. The «effective price» is located at the bottoms of the X’s and at the tops of the O’s.

Using the point-and-figure charts is simple. Almost all chart patterns and analysis techniques that work with the classic time-based charts work with the point-and-figure charts too. The trends are very easy to visualize in the P&F charts because the square dimensions of the boxes (X’s and O’s) form nice 45-degree angle trendlines. Look at the example:



Apart from the chart pattern analysis, P&F charts offer a sort of trading signals. When the trend direction changes, a new position can be opened in this new direction with a stop-loss equal to the reversal distance. But such trading technique requires some thorough optimization of the box size and the reversal distance for the given currency pair and the market conditions.

If you have any questions or comments regarding point-and-figure charting, feel free to reply in the commentaries to this post.

Thursday was a very slow day.The market was down. The yen crosses took a dive. Everyone is getting antsy about stocks, news reports, and the month of September. OMG, the risk! My robot snoozed for much of the day and had little chance to earn anything useful.However, amidst all the whining I have to realize that being up about 4.5% for the week isn't so bad.Regardless, I did tweak things a