Point and Figure Charts.

Nikhil asks “do you follow Point and Figure charts also? Did you try this type? what’s your experience? with them?
Are not they less ‘noisy’ than normal bar/candlesticks charts?”

My Notes: Since this a question that I can answer easily, I picked it up for a reply as soon as I read it. All technical tools work as promised provided the trader follows the tools, consistently. Then, point and figure charts are as good or as bad as most other technical methods. The skill lies with the trader.

I do not track point and figure charts. I have experimented with them earlier. I realized that I was comfortable with standard O_H_L_C charts and classical chart patterns. Point and figure charts also have their own pattern recognition methods.  Any one method of analysis is good enough.

Point and figure charts have a distinct disadvantage, which was not so much of an issue earlier,  but is now a clear drawback. These charts do not show gaps. Thus, overnight gaps are not visible. For intraday or even swing traders who use intraday charts, this becomes a major problem. Twenty years ago, intraday trading was not popular so the issue of gaps was not important. Now, if you are any kind of intra day trader , I cannot understand how you can use point and figure charts for such trading.

Reader comments are welcome.

Aiming for a better trade

This post gets its ideas from the SMB Training Blog . You should read their full post. The basic theme is this: what factors contribute to a well made trade? A well made trade will not always result in a profit. But, it provides satisfaction to the trader for correctly identifying, then executing the trade. This is what the blog says:

• Having a time stop – scratch a trade that does not work for me after a given period of time
• Being ultra-selective – trade only Radar/In-play stocks, which haven’t moved out of their ATRs, and still have rooms to go
• Covering risks – initiate with 2 lots on higher R/R setups, and covering risks with 1 lot into the next up move / down move
• Internalizing “second rat gets the cheese” – it is okay to miss the first 20c; you don’t have to be the 1st one in… let them do the battle, confirm the price action, and then I enter with more confidence.