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Strategies & Market Trends : Point and Figure Charting -- Ignore unavailable to you. Want to Upgrade?

To: Atin who wrote (25206)	2/15/2001 10:29:23 PM
From: Smooth Drive	Respond to of 34822

Hello Atin, Many good points Atin. I'm just not sure at this stage, so I use both high and low, and then close only on such things as a) P&F charts; b) Gann swing charts; c) Channel analysis; etc etc. I've heard people far brighter than me (hell that's about 99% of the world) make good arguments for using one or the other. Those that prefer the close say we are never going to have anything really important taking place after the REAL close. It's just small time stuff. The previous editor of TAofS&C, Tom Hartle, prefers the close in much of his work. I draw many of my trend channel's as he taught in an old article titled "Channel Analaysis" in V16:7. Here's what he said "The intraday fluctuations are important, but often the highs and lows represent momentary extremes, whereas the closing price represents the mark-to-market accounting for portfolios and is really the bottom line for the day's activities". He goes on to detail how most indicators are created with the close. In a recent Barron's interview, Price Headley (Bigtrends.com) had this to say about the close: Q: What else distinguishes what you do from day-trading? A: One of the things we really don't like to do is to make judgments based on intra-day activity. A lot of battles are fought during the day, but the war is won at the close. In this environment of excessive volatility, that's been more true than ever. We have Emulex type of situations, crazy moves one way or the other. So it's important to wait for the close to assess the market. Also, we focus on weekly and monthly charts, rather than daily charts. Q: Explain. A: You get a much cleaner read of overall trends in the market. For instance, last year, when Qualcomm broke down below a 50-day moving average, that provided a lot of people with an exit signal, and it created a lot of panic. But if you were looking at a weekly chart with a 10-week moving average -- the equivalent of a 50-day -- you would have waited until the end of the week and you wouldn't have gotten shaken out of Qualcomm because, by the end of that week, it had reversed and closed well back above the 10-week average. Extending the time frame blocks out the noise from your investment decisions. If you're getting conflicting signals, the chart with the longer duration will ultimately win. Certainly, we are short-term investors -- our time frame is a couple of months-but we are trying to get a sense of the bigger trends. We use options so we want to minimize the time the option is at risk but still try to capture the most out of a directional move. The main issue with my short-term approach is that it comes with a taxable consequence, which is a concern for high-net-worth individuals. So far, the returns we have generated more than offset even the highest tax rates. All I'm doing is comparing a H/L P&F chart with a close only P&F chart to see if there are some advantages to using the close only (in conjunction with the H/L chart)as a basis for short term trading signals. That is, does it make me more money than the other? If it don't help me make a buck, I won't use them. Take care, Eric