bobster,
Yes, I personally use a 2% box size in my work and my investments.
Why, well it's really pretty rational...
Using Traditional scaling, the Chartcraft/TD kind, you would use a fixed value of $2/box for stock prices over $100... Well $2/$100 gave me ~2%/box that is completely uniform over the entire range of .01 (for penny stocks) to 1E+6 (for Nekki, or whatever international currency you might want to use, or for RS comparisons where the number doesn't come out nice).
In addition, I've found that all the classic 'pattern work' is equivalent with 2% and 3 box reversal. I pretty much stick to 3 box reversals, but I received requests to allow 2,3,4 and 5 for some folks. I think they asked for the 4, and 5 box reversal because if one sticks with the $2/box definition the DJIA looks like hell and is nothing but column after column of full screen X and O.
Now, I see from his book, that Tom has adapted the Traditional scaling for the Dow and other high priced issues. Well, so have I. I use 20/box for 1000->10000 and 200/box for 10000-> when Traditional is selected.
Investing vs trading. Sticking to 3 box, and either Traditional or 2% give similar results, in my opinion. It's just that the 2% will give you faster reversals when you are at the lower end of each of the Traditional ranges eg $5, $20, $100 (vs say $300 or $400 etc.)
Trading... crank down the 2% to 1%.. that's like a 1-1/2 box reversal, but you have to be sure of what your doing.. we're talking going for $.50 to $1 or $2 swings in price here. You have to know the issue you are tracking and how it is affected by things like 'press' or 'inflation' or 'option expiration' short term price movers. you can keep the 3 box reversal so the patterns don't look too strange, but you 'tune' the reversal percentage. Understand that you are asking for more columns and signals, and that will distort the pattern you see with the Traditional or 2% scaling. You may have to print a 'traditional'chart to determine where the 'bullish' or 'bearish' resistance or support lines are... then keep that in mind when you 'zoom-in' to the 'stretched out' trader's pattern. It's like looking at a waveform on an oscilloscope. When the sweep is 200ms/cm you will see one pattern; when the sweep is 2us/cm you see details you couldn't see before...but it's the same waveform, and subject to the overall pattern of 'the big picture'.
Hope that helps,
Ben A. |
