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I received many question after my post of 28% profits using P&F. Since
many were similar, I will answer en mass. If you asked a question and
this post does not sufficiently answer your question, please email me.
N.B. - I had intended to mention one other point on Friday's post but
forgot. The 28% gain since 7/9 has been the result of many straight line
markets, such as the verticle drop in the Canadian Dollar and grain
markets. While I believe P&F can be very profitable over the long term,
I do not expect the returns to continue to be that dramatic.
1. Several folks asked about books.
STOCKS - If you are a stock trader, Thomas Dorsey's book "Point &
Figure Charting" is a must. It is generally available at major book
stores. If you want to buy on line, Amazon has the best price.
FUTURES - If you are a futures trader, go with Kermir Zieg's "Point
& Figure". The only source of this book that I have found is Traders
Press. You can find them online. His explanation is straight forward and
simple. Simple is the key because P&F is the essence of simplicity.
2. Teachers or classes - I know of no one that teaches P&F to the
public. Starting in September, I plan to do so but I'm in central
Virginia so that won't help too many.
3. RULES - Success in trading futures with P&F requires some additional
rules to lock in profits. This is why I recommend Zieg's book for
futures traders. I started with Dorsey's book which worked great with
stocks but I could not make it work for futures. Dr. Zieg gave me the
clue for success. Here, I'm talking about futures.
A. Trade a reversal system.
B. Enter on all double top or bottom signals. Thus, when long on a
double top buy, the next double bottom sell signal will liquidate
your long and put you short.
C. The exception to "B" is the profit taking rule. When a market has
run 10 boxes in one direction, use a 3 box reversal to stop yourself out
of the position. Since this does not break a double top or bottom, you
don't reverse your position. For example, let's assume we went short
gold at 294 and it dropped to 284 without reversing up. We would now use
287 as a stop to lock in profits. (Now remember, the last signal we got
was a sell at 294, so we should be looking to get short again.)
Now let's assume we get stopped out at 287. We will now use the next
reversal down to get short again. Frequently, you will get short at a
higher price than where you got out. If not, who cares because you have
again positioned yourself to get back in line with the trend.
D. Box sizes and reversals. I use 3 box reversals and the standard box
sizez listed in Zieg's book or in Chart Craft's chart book.
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