A Comparison of Japanese Kagi Charting with Point & Figure Charting

Julia E. Bussie, CMT

Introduction Kagi As the world shrinks to become one global community with Kagi charts are drawn with straight lines, the thickness of the borders and language barriers disappearing, individuals become line depending on whether the market is in a bullish or bearish more receptive to the ideas, methods and techniques of other mode. A bullish or rising trend in prices is designated by a thick cultures. Such has been the case in recent years in the C.S. con- kagi line called the “>-ang” line. The thin kagi line, called the cerning market analysis methods historically used by Japanese “yin” line, is used when prices are falling in a bearish trend. The investors. Thanks in most part to the efforts of analyst and au- line changes from thick to thin or pang to yin (bullish to bearish) thor Steve Nison, CMT, who researchedJapanese methods of tech- and lice versa when the trend changes, allowing a quick and clear nical analysis for his books Jananese Candlestick Chartirw Tech- reading of whether a market is in a bullish or bearish trend. The niques and Beyond Candlesticks, such terms as “candlesticks,” proportion of a line that is yang versus yin (thick I-ersus thin) “kagi” and “renko” are familiar to American technicians. Candle- indicates the or weakness of the market. ‘Kn” sticks are now included in most computer programs for technical and ‘Yang” are ancient Chinese philosophic and religious terms analysis. These methods have similarities with certain techniques that fbrmed the basis for Chinese medical practices as far back as that have been in use in the IVest for manv vears,~ but each has its the 8th century B.C., and it is likely through medicine that the\ own unique flavor providing differing vantage points for viewing were introduced into Japanese culture. They signify opposing markets. Of particular interest is kagi charting and its compari- forces that are naturally seeking equilibrium and a dynamic bal- son to M’estern-style point-and-figure chart analysis. Both meth- ance. In market terms, they characterize the struggle between ods belong to the older, chart-reading analvtical school as opposed supple and demand. to the more modern mathematicallv-derived technical anah-sis. Selecting a “reversal size” is the first step in constructing a kagi .4.sa consequence, they engender a ckrtain amount of subjec&ity chart. The “reversal size” is the amount market prices must re- in the interpretation of trading signals. In comparing the two verse before a change is made in the direction of the line on the techniques, this paper presents a brief description of how kagi chart. This dictates the sensitivity of the chart and the magnitude and point-and-figure charts are created and the strengths and of the trend sought. A small reversal size can lead to many minor weaknesses of both. Using a compilation of simple and complex fluctuations that obscure the trend. Conversely a larger reversal primary trading signals, the effectiveness of each method is re- size reveals only major trends. \hlatility and the general price viewed. Of necessity, only the basics are studied in an attempt to range of a market should be considered when determining rever- delineate an objective contrast between the two techniques, pro- sal amounts. Commonl>; the reversal size on a kagi chart is stated viding the analyst with a clearer choice of tools. as a fixed number of pomts. However, it is sometimes calculated Kagi and point-and-figure charting originated at approximately as a percentage of the price. offering advantages similar to a semi- the same time. Although no definite date or inventor of either logarithmic bar chart. By reducing all price movements to the method is known, both began to appear in the 1870s. In the same relative significance, a percentage reversal size allows a di- IVest, the writings of contained the theories preced- rect comparison between high-and-lowpriced charts. For ex- ing the development of point-and-figure charting. In the East, it ample, a chart of a Sl price change when prices are at $10 will is interesting to note that Japan had a functioning forward rice look identical to a chart of a $10 price change when prices are at market since the 16OOs, and was already in use. $100. This is most helpful in analyzing a long-term trend that In 1868, an imperial government was restored in Japan and the displays a significant price increase or decrease. Emperor invited foreign advisors into the country to help mod- Price is marked on the vertical axis with only a column num- ernize the near-feudal society A stock market opened for trad- ber (optional) on the horizontal axis. If prices are rising, a thick, ing in the 1870s. The increased commingling of East and LVest or yang line, is drawn from the beginning price until a change in facilitated the transfer of information and ideas on market anal?- price equal to or greater than the reversal size occurs. At this sis, furnishing a common breeding ground for both analytical point, a horizontal line is drawn to the next column where the techniques. line is then drawn down to the new lower price. The horizontal The two charting techniques share an ideology that seeks to line is called an “inflection point.” The downward line is contin- present a clear visualization of the forces of supply and demand ued until the next reversal occurs and another inflection point is and bullish and bearish trends while excluding irrelevant price drawn. An inflection point is called a “shoulder” when it turns fluctuations. Neither time nor are factors in the creation the line from up to down and a “waist” when it turns the line or analysis of either method. Recurrent chart patterns are used from down to up. Breaking the previous waist engenders a change to infer market action. in the line from vang (thick) to yin (thin). This denotes a trend change from bullish to bearish. \2’hen a preceding shoulder is broken, the line changes from yin to yang or thin to thick indicat- ing a change from bearish to bullish. ,\ change in thickness of the line (breaking a previous shoulder or waist) is an elementa? buy or sell signal.

MTA JOURNAL l Summer - Fall 1998 55 Illustrations of Basic Patterns Illustration D Kagi Charts

IllustrationA

------={ ---- -\ breakout l--LIT Multi-level Break

IllustrationB Record Session

Illustrations A-D show four patterns presenting important trad- ing opportunities. The names reflect the images symbolized b! the patterns. The “multi-level break” pattern (Illus. A) is an am- plification of the basic buy/sell signal. Instead of acting on the -- -- initial signal, some traders look for verification bp waiting for a tddiue second or even third shoulder (or waist in a bear market) to be broken, hence the name “multi-level break.” The inflection points being broken should be close to each other in price. The “three- Buddha” and “reverse three-Buddha” patterns (Illus. B) are simi- lar to the standard head-and-shoulders patterns on IVestern bar J charts and are topping and bottoming formations. A “two-le~el break” pattern is created when the “neckline” i.e., the highest Three-Buddha (reverse) shoulder in the pattern, is exceeded. The “double-windows” for- mation is an extension of the three-Buddha. At a double-win- dows top, (Illus. C) shoulders bracket one or more waists follow- ine an uptrend. LVhat differentiates this pattern from a multi- IllustrationC le;el-bre’ak pattern is that neither shoulder is as high as the waist(s), leaving a small “window )( on either side. The reverse is true for a double-windows bottom. These patterns give clear by and sell signals on breakouts. Several techniques allow the analyst to more objectively assess the strength of the current trend. The length of the yang por- tion of a line versus the yin portion of a line indicates whether bulls or bears are the stronger force. The midpoint of a kagi line window offers significant support or resistance, much as do 30% correc- tions on bar charts. If a correction halts before the 30% level is wmdow reached and then reverses to break a previous shoulder or wAst, that break becomes a stronger buy or sell signal. h grouping of i waists or shoulders at the same price level indicates important support or resistance. As on most charts, a series of higher highs and higher lows or lower highs and lower lows creates an image of the trend. Trendlines are useful as secondan tools. X trendline break often occurs after a kagi reversal, pro&ing confirmation of the earlier Double-Windows signal. On a kagi chart, a series of nine (not necessarily consecu- I tive) higher shoulders or lower waists is called a “record session” 1 (Illus. D) and indicates that the trend may be reversing soon.

56 MTA JOLXSAL * Summer - Fall 1998 Previous areas of support become resistance after a market rt verses and vice versa. Adherents of kagi charting recognize thl IllustrationF importance of double tops and double bottoms, referring to then as “tweezer tops” and “tweezer bottoms.” Taken together, these False catapult ^x features strengthen the analyst’s bullish or bearish interpretation $0 z and help with stoploss placement. X0 xX0 X+True catapult x0 x x x0 x0x0x lx xgx x WOE Point-and-Figure x0x xoxoxox xoxoxoxox In point-and-figure charting, displaying price movement u:i- 0X0X0 oxoxoxoxoxoxo oxox oxoxoxoxoxo ing Xs and OS to fill in squares or boxes on graph paper as OFb- gxg go gxo a& posed to a straight line going from point to point gives the char ‘t a different look from the kagi chart. A column of Xs is made aS 0 0 8X prices rise and boxes are filled in. Declining prices are shown b : a column of OS. As on kagi charts, prices must change by a prc Fulcrum o\;;;ng pattern: selected reversal size before a column of Xs is ended and a co i_ umn of OS is begun and vice versa, but in point-and-figure char t- ing, reversal size is the number of boxes that the market mw it IllustrationG IllustrationH reverse rather than the number of points. Each box or square iIS assigned a point value and a new X or 0 is made on the chal -t Es only when the price has moved in an increment of a whole bor ;. Fractions of a box are ignored. For example, if the box size iIS 00 0 designated at two points and the reversal size is three, the markt :t must move three boxes or six points in the opposite directio n : before filling in the next column, i.e., a stock price that trades aIS 0 :: ox high as 60 1.i~ in an uptrending market must decline to 54 (thre e 0x0 :: full boxes) before a column of OS are started on the chart. Th e oxox x high at 60 l/2 is regarded as filling the box at 60, so anythin g EExx~x above 60 is ignored until the market reaches 62 (another bo X higher). A larger box size condenses the chart and is useful fc Ii- %i” high-priced markets and on long-term (weekly or monthly) char1ts 0 to display the primaT trend. The combination of different bo X Fulcrum ok;;;iyg pattern: sizes and reversal sizes can reduce the chart impact of wide pric e swings in a volatile market and filter frequent minor reversals cjr “noise” from the chart, leaving major trend changes more e\ i- IllustrationI dent. Three-box reversal sizes are common in the volatile future 3 markets, but the reversal size can be whatever is considered opt i- ma1 and may take some trial and error to determine. Because a 0X0X0:x box is filled’onlv on a price change equal to the full box size c)r oxoxox more, absolute highs and lows that are less than the full box siz:e do not appear on a point-and-figure chart. Loss of these data is a %KE: drawback but does not affect interpretation of chart patterns. Ooog0 Illustrations of Basic Patterns 0 Triple Signal formation Point-and-Figure Charts Point-and-figure patterns de\-elop,as in kagi charting, that are IllustrationE Cl onsistentand classifiable,providing guidelines for judging fu- t1ire market activity In earlvwritings, the point-and-figuremethod :: I\ ‘asoften describedas “sc~entif? or “mechanical” becauseit is Ex X analogous with the physicalprinciple of leverageutilizing a price ongestionas a “fulcrum” and the invisible forces of supply and %0x x ZOE : emand as the “lever.” As thoseforces shift, a “catapult point” is oxoxoxoxox ~~~X~cE&XO rleached and the market “springs”away in a new direction. Con- Sl truction of the chart ignores gapsand usesthe closing prices of 0 0 S :t time periods, as doesthe kagi. Those time periods can be of Fulcrum or basing pattern: any length. Short-term traders often track every price change. A Ideal or Full siample buy signal comeswhen a column of Xs exceedsthe high 0 f the pre\ious X column. h downward column of OS createsa SC-11 signal when it breaksthe low of a previous0 column. Simple buy and sell signals occur frequently without tradeable fcAlowthrough. Complex patterns often provide signalsfor more

57 MTA JOLXNAL l Summer- Fall 1998 extended price mores offering an improved chance of profit. ;Ul patterns are a combination or expansion of the three el- Test ementam fulcrum or basing patterns: ideal or full, broad, and A comparison of trading signals on daily kagi and point-and- recoil. “Catapult points” or “breakout points” also come in three figure charts in several markets over an l&month time span be- styles: true, false, and semi-catapult. The “ideal fulcrum” pat- hveen October 1993 and July 1995 was undertaken to determine tern (Illus. E) is similar to a head-and-shoulders pattern and the if one method led to more profitable trading signals than the three-Buddha kagi pattern, which develop when supply and de- other. The chosen markets had high-I-olume trade activitv but mand are in balance. Prices mol-e up and down but remain in a were from different market segments. Daily charts and three-box range. The “catapult point” occurs when a column of Xs exceeds l-e\-ersals were selected to facilitate comparison between the two the tops of previous X columns. The reverse occurs on the down- methods and to provide a miiform test. This is not to be con- side when a column of OS exceeds the lows of previous 0 col- strued as a preference for a three-box reversal size or that these umns, and prices continue lower, confirming an “inverted ideal methods work best on dailv charts. Optimization of reversal sizes fulcrum.” If no followthrough develops from the catapult point for specific markets is a topic for another study. Each chart was and prices return to the area of the fulcrum, the ideal or full analyzed using the most rudimentary buy and sell signals and again fulcrum becomes a “broad fulcrum” (Illus. F). The “recoil ful- using more complex, clearly visible patterns. The first procedure crum” (Illus. G) develops after a sharp move. At the bottom (or was in the market at all times, exiting and reversing positions at top) of an extended column, a group of columns develops with the same time. The latter method utilized previous simple sig- each succeeding column shorter than the one before, creating nals as exit points to take profits and limit losses. Restricting the the recoil fulcrum which generally has a triangular shape. second study to only the most obvious formations minimized sub- Breakouts from a fulcrum typically occur in conjunction with chart jectivitv. Specialists in these analytical techniques may see more patterns such as “triples,” three X columns with the tops at the esoteric trading signals that were either missed or ignored in this same level or three 0 columns with lows at the same level, where studv. More aggressive traders may also use different rules for multiple columns are broken simultaneously (Illus. I) or “tri- stop-loss placement. No consideraiion was given for transaction angles,” called “signal” formations (Illus. J). The latter are differ- costs. This study is meant as a guideline for the analyst or trader entiated from recoil fulcrums because they are part of larger for- who is considering adding kagi or point-and-figure analysis to his/ mations rather than reversals at major highs or lows. her blend of technical methods. LYebster’s Colleze Dictionan’s definition of “catapult” is “to move quickly suddenl? or forcibly,” as the market is expected to Test Results - Simple Signals do when a catapult point is reached. A true catapult point leads Kagi Point and Figure to the development of profits quickly with little or no correction from the breakout. A “false catapult” is a failure, usually indi- Market It Trades Net Profit/Loss # Trades Net Profit/Loss (in points) cated by a greater than 50 R correction of the breakout column (in points) and warns that the consolidation may not have been a fulcrum. Exxon t 7.125 9 t 19.500 A “semi-catapult” (Illus. H) develops during a pause in a price CocaCola i - 6.500 9 t 5.500 move after prices have traded sideways and the chart shows one Telefonosde Mexico 6 t 31.875 9 t 32.000 or more reversals in a narrow range. The “secondary signal” or U.S.Bond futures 9 - 2.344 11 - 3.875 “semi-catapult” occurs when the original move resumes. “False Soybeans 13 - 72.500 12 -102.000 semi-catapults” fail to follow through as expected. TOTAL 42 - 42.344 50 - 48.875 These are the basic trading patterns involved in point-and-fig- ure charting. Because each pattern has many variations, specific -8.469 + 38.699 -9.785 + 53.329 patterns are sometimes difficult to recognize, but the underlying o = -4.569 0 = -5.450 signal to buy or sell always occurs on a breakout. Trendlines offer supplemental information on point-and-fig- (Withoutsoybean data 5.647+ 24.367 12.875+ 30.932 (T= 4.315 CT= 2.402) ure charts, also. They are drawn as on a normal bar chart con- necting a series of highs or lows. An exception is on a three-box reversal chart, where trendlines are most frequently drawn at a Test Results - Complex Signals 45 degree angle up from a low point or down from a high point. Kagi Point and Figure Although these display the trend, they are more accurately de- Market # Trades Net Profit/loss # Trades Net Profit/Loss scribed as lines. In either method of (in points) (in points) trendline construction, penetration of a trendline needs accom- Exxon panying buy or sell signals to indicate a valid trend change. 2 t 12.250 3 t 18.500 CocaCola 3 t 12.125 A feature unique to point-and-figure charts is the ability to ar- t 10.500 Telefonosde Mexico 3 t 51.745 ; t 22.000 rive at price objectives through the use of horizontal or vertical U.S.Bond futures 9 t 5.719 4 t 4.313 counts, an aid in determining whether the potential reward of Soybeans 5 t 20.000 6 t 20.000 following a trading signal is sufficient given the measured risk. The sides of a fulcrum provide the parameters for horizontal TOTAL 22 t101.839 18 t 75.313 counts with the total then added to the low of the fulcrum. A vertical count can be calculated by multiplying the number of Standard Deviation 20.368+ 18.256 15.063+ 7.515 boxes in the first column of a new trend by the reversal size. No o = ,896 0 = ,499 comparable technique exists on kagi charts. Consequently this feature, while a definite advantage for point-and-figure charting, is not applicable in comparing it with kagi charting.

MTA JOURWL l Summer - Fall 1998 Results uncertain signals and enhance stop placements. The profitabil- im of complex trading signals in both techniques makes it worth- Using simple signals. no advantage was found using either kagi while to initiate a system of periodic searches for these patterns or point-and-figure as both resulted in losses, although losses us- in a variety of markets no matter lvhich analytical technique is ing kagi techniques were less than with point-and-figure. In both preferred. cases, severe losses in the soybean market were a primal? factor The usefulness of kagi and point-and-figure charting has been in the negative results. This was likely due to the volatile nature confirmed by over a century of testing. Choosing one over the of soybean price movement and mav be representative of futures other is a personal decision to fit each analyst’s trading style. The markets in general, requiring optimized reversal and/or box sizes time and effort spent learning to understand both of these tech- to improve profitability, but again, that is a topic for another study. niques will be rewarded with greater profits and a better compre- Disregarding the results of the soybean test improved the overail hension of the ebb and flow of bullish and bearish forces in the outcome and gave the edge in profitability to the point-and-fig- markets. ure charts. In addition, a lower level of relative risk was indicated with point-and-figure, but the standard deviation of both meth- Bibliography ods still indicated a dispersion of results that is too wide to be Robert D. Edwards and John hlagee, Technical Analrsis of Stock relied upon. Trends. Fifth edition. Boston, RL-\: John Rlagee Inc. 1966 In every market studied, the test results clearly illustrate the advantages of exclusivel: following complex patterns. Both meth- Steve Sison, Beyond Candlesticks-More Tapanese Charting Tech- ods were profitable. Filtering out smaller moves and ignoring niques. New York, !KY John iVile!- 8: Sons, Inc. 1994 the myriad simple bw/sell signals focuses on larger trends, great11 Steve Nison, T/v 1771nrzd lirngo/Tding, Futures Slapazine, Oster enhancing profitability per trade. The contrast between using Communications, November 1994 simple and complex trading signals vas speciallv apparent in the \‘ictor de \‘illiers and Owen Taylor, The Point and Figure Method sol-bean market. A side benefit was fewer trades resulting in lower of Anticipating Stock Price Rlovement, Basic Princinles - Book to;al commission costs. Complex signals reduced the number of 1. New York, AY distributed by Morgan, Rogers and Roberts, trades to an average of one trade every fiye months I-ersus an al- Inc. 1931 erage of one trade every two months following simple signals. Kagi charts offered a performance edge over point-and-figure h.12: Cohen, How to Use the Three Point Reversal Method of at this level, returning a total of 38% more in the five markets Point and Fiwre Stock Market Trading. Sew Rochelle, AY with a slightly larger average profit per trade. This superior per- published by Chartcraft, Inc. 198’7 formance was primarily due to earlier entry signals and more prof- Alexander H. IVheelan, Study HelDs in Point and Fizure Tech- itable exit signals directl: resulting from point-and-figure’s use of -. New York. PUY Morgan. Rogers and Roberts, Inc. 19.51 whole box sizes and the consequent loss of accuracy. However. The Sew Grolier hlultimedia EncycloDedia. Release 6, Groliers kagi charts had a standard deviation of 89.6% versus 52.7% for Inc. 1993, Online Computer Systems Inc. 1987-1993 point and figure, indicating that point-and-figure, while not as Charts from Metastock b!- Equis International. version 45 RT, profitable, was significantl? less risky. 19851994 Conclusion Data from Signal by Data Broadcasting Corporation, San Mateo. CA Both kagi and point-and-figure charts provide excellent illus- trations of trend and offer alternatives to other trend indicators. They are similar and yet distinctive. The kagi chart presents a Biography clearer picture of the strength or weakness of a market and is Julia Bussie is currently a private trader in southern Cali- easier to draw. Its simplicity and clarity make it perfect for the fornia concentrating on the futures markets. Prior to this, novice trader while its profitabilit? is attractive to all traders. she was an analyst with A.G. Edwards in Chicago. She was a Unfortunately, the popularity of kagi charts is limited because member of the Chicago Mercantile Exchange for eleven !-ears only a few U.S. computer charting programs offer them. How- and a member of the Chicago Board of Trade for ten years. ever, the lower risk of point-and-figure charting makes this method She has been involved in many aspects of the futures in- yen attractive, particularly for the trader with a lower-risk pro- dustry over the past twenty-five years and has written numer- file: \2’hen other considerations are factored in, such as the wide able market commentaries, newsletters and long-term out- availabilitv of point-and-figure charting and the ability to calcu- looks with a more fundamental bias, but is now focusing al- late price’objectives, point-and-figure holds a decided advantage most entirely on technical analyis. Julia is the Admissions over kagi charting. Chairperson’for the Market Technicians ,%ssociation, Inc. and lnterpretation of signals on kagi or point-and-figure charts can be reached at [email protected]. comes from “reading” the charts, and is dependent on the analyst’s abilir): to recognize and identie those signals when they occur. Famlharization with the basic patterns helps to develop an “artis- tic eye” that quickly recognizes complex patterns when they de- velop, sometimes anticipating a formation in progress and pre- paring for action. Several refinements and advanced tools are available in both methods to further enhance profitability Trendlines (or support and resistancelines) and 30% corrections can add confidence to trading signals, provide caution flags to

59 MTA JOLXML l Summer - Fall 1998 EXXON !&gi Point & Fioure 1.5 point reversal .5 point box size, 3 point reversal 1. Buy 62.500 Simple Sionals 2. Sell 65.000 1. Buy 64.625 3. Buy 61.500 2. Sell 61.625 4. Sell 60.500 3. Buy 59.000 5. Buy 59.000 4. Sell 58.625 6. Sell 58.000 5. Buy 60.375 7. Sell 60.500 Liquidate 70.000 (at end of chart) 8. Sell 62.500 9. Sell 64.000 Liquidate 70.000 (at end of chart)

Net Profit, 5 trades Net Profit, 9 trades +19.500

Complex Sionals 1. Break of triple bottom, Sell 60.500. 1. Multi-level break, Sell 61.625 Stop at 63.000, lowered to 59.000 and hit. Stopped out at 59.000 2. Break of triple top, full catapult, Buy 60.500. Stop at 56.500, 2. Reverse three-level Buddha formed, no action taken because of no raised to 59.000, 60.000, 61.500. Liquidate at end of chart of breakout. 70.000. 3. Muli-level break, Buy 60.375 3. Bullish signal formation, Buy 62.500. Liquidate at end of chart 70.000 Stop at 60.000, raised to 61.500. Liquidate at end of chart at 70.000. The aggressive trader could have added positions on subsquent multi- level breaks after the first and third trades.

Net Profit, 2 trades tl2.250 Net Profit, 3 trades +I 8.500

COCA-COLA Kaoi Point & Figure 1.5 point reversal .5 point box size, 3 point reversal Simple Sianals 1. Buy 43.500 1. Buy 42.750 2. Sell 41.000 2. Sell 41.125 3. Buy 44.500 3. Buy 44.250 4. Sell 40.000 4. Sell 40.125 5. Buy 42.000 5. Buy 42.000 6. Buy 42.500 6. Sell 39.375 7. Buy 48.000 7. Buy 42.375 8. Sell 49.500 8. Sell 49.750 9. Buy 53.000 9. Buy 52.875 Liquidate 58.500 (at end of chart) Liquidate 58.500 (at end of chart) Net Profit, 9 trades -6.500 Net Profit, 9 trades t5.500

Comfllex Signals 1. Multi-level break, Sell 40.000. Stop at 42.750, lowered to and hit 1. Breaking triple bottom, Sell 40.000. Stop at 42.500, lowered to at 40.000. and hit at 42.000. 2. Multi-level break, Buy 42.375. Stop at 39.250, raised to 45.250, 2. Breaking triple top, Buy 42.500. Stop at 39.500, raised to 45.500, hit at 49.750. hit at 49.500. 3. Multi-level break, Buy 53.750. Stop at 49.000, raised to 52.000, 3. Breaking triple top, Buy 53.000. Stop at 49.500, raised to 56.500. 56.250. Liquidated at end of chart at 58.500. Liquidate at end of chart of 58.500.

Net Profit, 3 trades tl2.125 Net Profit, 3 trades tlO.500

60 MTA JOLXML l Summer - Fall 1998 TELEPHONOSDE MEXICO Kaoi Point & Fiaure 3 point reversal 1 point box size, 3 point reversal 1. Sell 56.000 Simple Sionals 2. Buy 59.000 1. Buy 55.875 3. Sell 60.000 2. Sell 65.250 4. Buy 54.000 3. Buy 59.500 5. Sell 64.000 4. Sell 54.250 6. Buy 59.000 5. Buy 63.375 7. Buy 49.000 6. Sell 62.250 a. Buy 37.000 7. Buy 30.500 9. Buy 30.000 Liquidate 31.OOO (at end of chart) Liquidate 31.000 (at end of chart)

Net Profit, 7 trades +3i .a75 Net Profit, 9 trades t32.000 Comolex Sianals 1. Double windows top, Sell 56.625. Stop at 65.125, lowered to 1. Bullish signal formation, Buy 60.000. Stop at 54.000 and hit. 59.500 and hit. 2. Bearish signal formation, Sell 59.000. Stop at 64.000, lowered to 2. Multi-level break, Sell 59.750. Stop at 65.500, lowered to 63.625, 55.000, 43.000, 36.000. Liquidated at the end of chart at 31.000. 57.375, 54.375, 42.500, 37.750, hit at 30.500. 3. Double three-Buddha, Sell 58.875. Stop at 57.375, lowered to 54.375, 42.500, 36.750, 35.500 hit at 30.500.

A record session (a series of nine lower highs or higher lows) occurred, alerting trader to a possible trend reversal.

Net Profit, 3 trades t51.745 Net Profit, 2 trades t22.000

U.S.TREASURYBOND FUTURES,DEC1994 Point & Fiaure Kaoi .5 (^ 16) point box size, 3 point reversal 1.5 (1 Al 6) point reversal 1. Buy 111*00 Buy 117AOO Simole Sianals 2. 3. Sell 113AOO 1. Sell 113*09 4. Sell lllA16 2. Buy ii3Aoa 5. Buy 114AOO 3. Sell IllA 6. Sell 112”16 4. Buy 113”13 7. Buy 104”16 5. Sell 112~14 a. Sell lOl”16 6. Buy 104AO3 9. Buy 104A16 7. Sell iOlA12 10. Sell lOiAl6 a. Buy 104*06 11. Sell 101A00 9. Sell lOlAl4 Liquidate 99AO6 (at end of chart) Liquidate 99AO6 (at end of chart) Net Profit, 9 trades - 2*11 (-2.344) Net Profit, 11 trades -3A28 (-3.875) Complex Sianals 1. Multi-level break, Buy 114*02. Stop at 111*03, raised to and hit 1. Bearish signal formation, Sell llifi16. Stop hit at 114~00. at 112A14. 2. Double top, Sell 112A16. (Proximity to 45 degree downtrend 2. Tweezers top, Sell 112A14. Stop at 1 OVO7, lowered to and hit line gives power to this signal. Stop at 114A16, lowered to and at 104A03. hit at 104~16. 3. Tweezers bottom, Buy 104~03. Stop hit at 104AOl. 3. Breaking triple bottom, Sell lOiA16. Stop at 105~16, lowered to 4. Multi-level break, Sell lOlAlO. Stop at 105~01, lowered to and and hit at 104~16. hit at 104AO6. 4. Bearish signal formation, Sell lOi*OO. Stop at 103~16. Liqui- 5. Multi-level break, Sell 1 OlAO4. Stop at 102A15, lowered to and dated at end of chart at 99AO6. hit at 99AO6.

Net Profit, 5 trades +5A23 (t5.719) Net Profit, 4 trades t4AlO (t4.313)

MTA JOURUAL * Summer-Fall 1998 61 SOYBEANFUTURES, JULY 1995 KgLi Point & Fiiyre 9 point reversal 1 point box size. 3 point reversal Simole Sionals 1. Sell 658.5 1. Buy 672.0 2. Sell 651.5 ;: 3 669.5651.5 3. Buy 645.0 4. Buy 643.5 4. Sell 651 .O 5. Sell 652.0 5. Buy 687.0 6. Sell 651 .O !: 3 686.0648.5 7. Sell 579.0 592.0 8. Buy 591 .o 89:“,I3 582.0 9. Sell 576.0 10. Buv 589.5 10. Buy 594.0 11. Seil 585.0 11. Buy 600.0 592.5 12. Sell 582.0 1;:3 582.5 Liquidate 588.0 (at end of chart) :;Mi:i (at end of chart) Liquidate Net Profit, 12 trades -102.0 Net Profit, 13 trades

Comolex Sionals 1, Multi-level break, Sell 649.0. Stop at 672.5, lowered to and hit at 1. Break of triple top, Buy 672.0. Stop hit at 651 .O. 643.5. (Tweezers top adds power to sell signal.) 2. Break of triple bottom, Sell 651 .O. Stop at 671 .O, lowered to and 2. Multi-level break, Sell 644.0. Stop at 675.0, lowered to 612.0, hit hit at 645.0. at 589.5. 3. Bullish signal formation, Buy 645.0. Stop at 627.0, raised to and 3. Multi-level break, Sell 581 .O. Stop at 610.0, lowered to and hit at hit at 650.0. 589.5. 4. Break of triple bottom, Sell 651 .O. Stop at 675.0, lowered to 4. Multi-level break, Sell 577.5. Stop at 595.75, lowered to and hit at 612.0, hit at 591 .O. 592.5. 5. Break of triple bottom, Sell 576.0. Stop hit at 594.0. 5. Multi-level break, Sell 596.5. Stop at 561 .O, lowered to and hit at 6. Break of triple top, Buy 594.0. Stop at 561 .O. Liquidated at end of 582.5. chart at 582.0.

Net Profit, 5 trades Net Profit, 6 trades

62 MTA JOURN.iL l Summer - Fall 1998