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[Quoth the Rob Fletcher:]
>
> Could someone please give me an idea of the correct box sizes for P&F
> boxes. Not in fractions, I trade on the Australian market in dollars and
> cents. I mainly trade in Gold shares where the market price range is
> from say 10c to $5. For example if you were plotting a stock that has an
> extreme range let's say of $2.50 to 10c what box size would you use?
>
> I also trade SPI FUTURES (SnP equivalent in Australia), currently it's
> trading in the 2900's and a range of 40 points a day is not uncommon at
> the moment. What box size would you use in that market.
>
> I know the box size makes a lot of difference as I've tried a few with
> just a few cents difference and suddenly a double bottom appears where
> one wasn't before.
> I've tried posting something at the dorseywright.com forum, but it
> appears they don't let someone on a two week trial post messages.
>
> As you might have guessed I've only just started looking at P&F, but
> from all the TA I've investigated, this method seems very promising.
> Thanking anyone in anticipation.
> Rob
There are several possible approaches to choosing the box size (in
ticks) and reversal size (in boxes):
1. Use a 3-box reversal and take the box size to be about half of the
average true range over, say, 10 days. You don't want to do this every
day, of course :-). Recommended by LeBeau and Lucas.
2. Get a year's worth of past data and do a brute-force optimization
search with a computer for the best box and reversal size given your
trading rules. This is the Kaufman - Zieg approach; Zieg claims it has
value. See
http://www.teleport.com/~znmeb/biblio.htm#[Zieg97]
3. Use a standard reversal of three boxes and pick the box size so a
year's worth of data fits on a single page. A good number to use for the
height of a page in boxes is 64.
Other possibilites are documented in Kaufman's "Trading Systems and
Methods." This is still the best reference on point and figure
charting.
See
http://www.teleport.com/~znmeb/biblio.htm#point_and_figure
for more book selections.
--
znmeb@xxxxxxxxxxxx (M. Edward Borasky) http://www.teleport.com/~znmeb
If God had meant carrots to be eaten cooked, He would have given rabbits
fire.
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