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December 22, 1997
Kevine,
In response to your mail on RT. I have seen a very good book on P&F charting
but unfortunately, I forgot its name. A friend of mine has got it so I'll try and get
you its name in a day or two. Have you seen Technical Analysis of The
Futures Market by John J. Murphy? It has two chapters on P&F charting and
three point reversal.
There is really nothing much complicated about P&F charting, just some basic
techniques and formations that you'll need for Forex. I have used P&F
extensively for both Forex and futures. But 90% of the time, we make it by
hand. Its gives a much better insight of the market as we are following every
tick and plotting it by hand. In case we need a quick change of scale, then we
quickly switch to our technical computer.
The scale needs to be adjusted according to the counter you're trading and, of
course, your trading style. For example, I use 10 X 3 for cash pound, yen and
Swissie, 15 X 3 for D-Mark as it moves more than others. For futures currency,
and T-Bond mostly 1 X 3; 2 X 3 for pound. One point though, it is very good
if you keep different scale charts on your computer. Sometime, when you're
watching the market and it starts to MOVE you wonder what the hell happened
suddenly. Switch to a lower scale and you'll probably see a formation break-
out, (e.g. flag formations - which are very frequent in Forex) usually end up in
rallies or reactions.
One more point, ALL the technical analysis computers I have used have a
problem in their P&F charts. They are not updated in real-time although they
receive the prices in real-time. Telerate's Teletrac, Reuters' TA and Bridge's
ProfitCenter all have this problem. As you know that there is no time plotted on
the X-axis, but Teletrac plots a time frame (5, H, D etc.) and the chart is
updated after the period is over. RTA and ProfitCenter have a much better
charting system.
Hope this helps. Good trading.
Mubashir Nabi.
Financial Intermarket Research & Management.
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