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I do not use p&f to trade, and I rarely use it in my analysis, but as a
professional technical analyst I can give you some background on it.
What p&f does very well is highlight price reversals and breakouts from
congestion. There are patterns in p&f that are similar to bar charts and
candles, but there are additional ones that are particular to these
charts. Though I believe some people use them even with small box sizes
and reversals, I have always felt that it works better for bigger
picture type stuff, since it can in essence summarize a large amount of
price movement in a small amount of space.
One of the problems with p&f is that it is price only. There is no time
scale on the chart, so if a market range trades for a long time, you
might not update the chart at all, but might be missing a large amount
of congestion, which on a bar chart, or cumulative market profile chart,
would show up as a very important level, but would not mean too much on
the p&f.
THE SINGLE BIGGEST PROBLEM WITH P&F IS THAT NONE OF THE COMPUTER
PROGRAMS (that I know of) BUILD THE CHARTS PROPERLY. You can only build
a p&f chart with tick data. Daily O/H/L/C will not work since the order
that the prices occurred is important. So, that means you need to build
them yourselves and have access to the full tick info or time and sales
data.
If you have more questions, please feel free to contact me.
Steve Poser
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Steven W. Poser, President
Poser Global Market Strategies Inc.
http://www.poserglobal.com
Email: swp@xxxxxxxxxxxxxxx
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