The title made me smile.  Been asked and answered some time back:

"I have become familiar with point and figure charts and their use. Why aren't these methods used on tc2000 software?  Point and Figure charts seem to have some advantages over the other charting methods. Can they be integrated into the current software or do you find their use and application impractical? -BB

When I get a question like this, I often wish I could say something like, “Why do you want to know? What do you want to accomplish with P&F charts?” Chances are the answer would be something like, “I just wish I could have more and better trades.”

If that would be your answer, then I would say, “They won’t improve your percentage in any way, and they won’t increase the size of your average profit. They may complicate your life by having one more thing to look at.”

Then you might say, “That’s well and good for you to say, because you don’t have them in TC2000. But I happen to have heard that you used to publish P&F charts and that you developed some kind of a system that required them.”

“Oh, so that’s it!” I respond. “Okay, sit down and I’ll tell you the story.”

Once upon a time there were no computers. I am one of the unlucky minority who remember those days vividly. We had paper and pencils and graph paper. And elbow grease. Each day we sat down and plotted the high, low close and volume on a chart. It required skill and practice. You had to keep all four numbers in your head until you finished the plotting. If you forgot them, you had to go back to the price page of the Journal and find your place. You might say, why didn’t you mark your place with a red pencil, and I would tell you that I tried that and it was too slow. You had to hold them in your head. To be really good you had to be able to plot the bar from high to low without first making little dots and then connecting them. This saved an enormous amount of time. You, twenty-first century trader, know nothing of such onerous tasks.

No matter how good you were, one person could keep up only a limited number of daily bar charts. But there was another kind of chart. MUCH easier to keep up. You guessed it, my man. It was called the Point & Figure Chart. Depending on the exact type of P&F chart you used, one person could keep a chart of every listed stock in maybe two hours a day. The key to the ingenious efficiency built into the P&F was that you only have to plot any given chart when something happens. If the price of XYZ doesn’t change much, chances are you won’t have to plot any of those X’s and O’s on the XYZ chart. As I recall, only about one in five charts need to be plotted on an average day.

You now know the overwhelming advantage of P&F charts. They’re easier to keep up than bar charts. But you have a computer! Not only can you keep bar charts up by pushing a few buttons, you have access to varying time frames and more indicators than you would be wise to try to use.

Is that all there is to it? Not quite. That’s the important part though. There is a certain mystique about P&F charts. I think it’s because sidewise movement does not depict time. It depicts happenings. Specifically it depicts the number of defined price reversals. There are no indicators on P&F charts, not even volume.

A P&F chart is a “summary” of price events. You do not plot prices. You plot prices that have been rounded off in a number of ways. I found that they lend themselves to tactical systems, because they are so simplified that it is easy to classify stocks as in upswings, downswings and congestion areas. Loss-cut points are easy to set up. There is, however, a serious question of whether this is “simplification” or “over-simplification.”

A method of P&F chart “analysis” that was widely used was counting the number of squares in a base, and then setting a target the same number of vertical spaces up. This is nothing more than what I would term “seductive nonsense.” It will work just often enough to keep those who want to believe believing.

I’m not saying we shall never include P&F charts in TC2000. I don’t know, and it won’t be my decision. If we do, it will be only a minority of Users who will use them. The computer age is here and P&F charts are not on the cutting edge. -DW

Okay then.  I'm uping the ante to 2 starbuck cards. : )

I have found out that he uses an average of the daily range (H less L) as the basis for the upper and lower trend lines.  I have created a number of different daily range averages as indicators but it could be any combination.  I suspect this one won't be solved.

Merry Christmas and good trading to all.

Eric

Hello,

I’ve been following a trader that posts charts having a horizontal trend line above and below the first day of the month High and Low  and I haven’t been able to crack his method (it’s a challenge that I’m not getting).  The trend lines are created after the first day of each month and extend to the end of the month and then change accordingly.  He claims they are volatility derived but doesn’t give much more info. 

Five recent examples as of 11/1/13 are as follows:

AAPL: Upper line is 538.17 and lower line is 502.47 (Number needed: 13.37)

AMZN: Upper line is 375.69 and lower line is 346.18 (Number needed: 9.92

NFLX: Upper line is 347.53 and lower line is 311.87 (Number needed: 14.03

WFM: Upper line is 65.6 and lower line is 614.34 (Number needed: 1.44)

WYNN: Upper line is 171.52 and lower line is 162.85 (Number needed: 3.57)

If anyone gets real close to these figures, I'll send you a $25 Starbucks gift card.  Really : )

Thanks,

Eric

I see that if I check the "Plot using price scale" the lines magically come together.  Please disregard ill informed question.

This has probably only been asked thousands of times but that will make this one easy for you to answer.

I have never looked at the custom indicator and for fun I just put in a 5 day moving average based on the close in the upper window: (c+c1+c2+c3+c4)/5.  And, by gosh there’s the line on the chart.

Next, I added the default 5 day moving average. 

Question:  Why are the depicted lines on the chart so different while the calculated numbers appearing in the pop up box (double click the period key) the same?  For instance, IOC on 11/30/10 has both the default 5 DMA number and the custom number at 76.63.  However, the displayed lines are not the same.  The Worden 5 DMA appears right on but the custom line is at approximately 78.

Thank you.