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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (50074)	1/16/2004 10:10:55 AM
From: PuddleGlum	Respond to of 57110

Jorj, I highly recommend the use of percentage p&f charts. The reason that you change the number of price points at $5, 20, and 100 is because back when p&f was invented it was too computationally intensive to use percentage. But you can see that the target box size was approximately 2%. If you look at IBM on standard charts, you'll see 3 boxes added when it moves from 90 to 93. If you look at SMMX you'll see 3 boxes added when it went from 20 to 23. That's a bit more than a 3% move for IBM, and a 15% move for SMMX, so you have built-in misinformation when looking at these charts. And this misinformation is built in whether you use 1 pt. or 5 pt. box size, but percentage charts just clear away most of the confusion. And with the default settings you can never get a good look at a $2.00 stock, whereas the only problem you'll have with % charts on a $2 stock is that the spread may get in the way (DRUG is an example). FYI, I noticed that you can have a stock trading below the bearish resistance line on 2% box size, but above it on 2.5% box size, so there is still some use for variable box size. I also noticed that long columns of X's or O's tend not to be so significant with percentage charts, so they do take some time to get used to. But I will never go back to standard p&f settings.