Kagi Chart Patterns Trading Strategies | TradingSim

1 – What are Kagi Charts?

Kagi chart is a case of chart that is wont to track the price movements of a security. Unlike longstanding stock charts such as the line, bar (OHLC) or candlestick charts, the Kagi chart pattern is unique. While time and price are two variables that are plotted on handed-down strain charts, with Kagi, only price is considered.

Thence, a Kagi chart has sole price, which is plotted on the y-axis and non time, which is premeditated on the x-axis of rotation. Past removing the element of time, a Kagi chart pattern gives a clearer picture of what Mary Leontyne Pric of a security is doing. It eliminates, what is referred to arsenic "dissonance" in the market, which is common to the candlestick and bar chart.

A Kagi chart pattern is unusual as it plots Price like a "snake" and in a continuous form. When price is falling, the line is plotted in red color and when terms is rising, the Kagi line is plotted in sick color, when the preceding highs and lows are breached.

Traders use the Kagi chart design due to the way it represents price, eliminates noise and shows untroubled trends. A Kagi chart is largely used in technical analysis and among daylight traders.

The first chart infra shows an good example of a Kagi graph for the AAPL stock chart.

Example of a Kagi Chart

You can check how different the Kagi chart looks like compared to one of the many traditional forms of stock charting. Although on the Kagi chart, you can see time; this is redun&t and inapplicable to the concept of this type of chart.

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2 – History of the Kagi graph

It is said that the Kagi chart was earlier developed in Japan, during the 1870's. This was around the time when the stock markets were introduced in the region. Kagi charts were originally secondhand in Japan to dog the terms of rice. Game in the day, Kagi graph helped traders to understand the supply and demand levels. (Candlestick charts were as wel designed initially by the rice traders in Nihon).

The fact that Kagi charts are still used to this day, and are commonly recovered on most charting platforms is a testament to the effectiveness of this type of analysis.

Kagi charts, along with a number of other fourth dimension-independent chart types such as Point and Frame and Renko charts were introduced to the horse opera world by Steve Nison.

Nison spent a considerable amount of time in Japan, studying the various unique chart types. He also published numerous books on the various charting techniques that are used now.

3 – How are Kagi charts constructed?

A Kagi chart is created away a series of vertical lines which depict toll movement. These vertical lines are connected by a crosswise line. In some charting platforms, a Kagi chart can likewise change the heaviness of the line. This occurs when price reaches the piping or the low of a previous horizontal.

With a Kagi chart, a predetermined terms is secondhand. For example, if you selected a value of 5, that would represent a $5 move in the security. Or a value of 0.10 would mean a $0.10 move in the price of the security.

A Kagi chart can also be designed on a percentage base. A 4% setting for a Kagi chart would mean that when price reaches 4% move, it will interchange the charge accordingly.

When at that place is a reversal price movement, a horizontal line is plotted.

A Kagi chart can also make up configured away using the average genuine straddle (ATR) respect. In this case, the 14-period ATR treasure is victimized as the setting for the Kagi chart. Of course, the downside organism that when the ATR prize changes, the Kagi graph mise en scene also changes.

In the future chart down the stairs, we have an illustration of a Kagi chart for the AAPL stock price. Hera, we usage a evaluate of $1 or simply 1.

Kagi Chart with $1 turnabout price on a 5-minute chart

In the Kagi graph, the main factor is the setting itself, which shows the reversal. So, going back to the supra example, when price closes below the previous low, a bearish Kagi is drawn (depicted in red line) or when toll closes above the previous high, a bullish Kagi (depicted in park line) is closed.

The base time frame is also important in the Kagi chart. For model, referring back to the "Kagi chart with $1 reversal toll on a 5-narrow chart," the concluding prices are taken from the 5-minute close.

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Typically tick data is used, but considering that this is non always available on most charting platforms, the 5-minute or symmetric 1-atomlike fundament time frame can exist ill-used.

To understand how Kagi charts plot price, get a load at the above graph, where we have three price levels plotted.

In the first instance, price closes at $155.78.

Then, price waterfall to $154.37, which is a remainder of $1.41. Because this is greater than the setting of $1 reversal, we have the Kagi chart that plots lower.

It is still "green" or optimistic because the previous low was non breached.

Then price rallies to $155.90 from the low of $154.37. This is a dispute of $1.53. Therefore, we have a bullish Kagi chart premeditated present.

Subsequent on, we see price falling to $148.76. This is a drop of $7.14. Here, we hold a pessimistic Kagi because it broke past the nearly recent ground-hugging of $154.37 and the refuse to $148.76 was greater than the $1 reversal setting.

What we can observe from the above example is that trends are clearly depicted on the Kagi graph. Naturally, to wait for this trend, day traders will have to wait for the Kagi chart to evolve. The decline from $155.90 to $148.76 would have occurred over a prolonged period of time.

4 – How to use the Kagi graph for trading?

Right off the bat, it is clear that technical analysis can cost a great fit for the Kagi chart. Most importantly, defend and immunity levels are clearly seen on the Kagi chart. You bum also look at trend lines which can testify when price is breaching the trend.

Referring to the side by side graph below, you can see some support and resistance levels and extraordinary trend lines that are plotted happening the chart.

In the in a higher place example, after the trend short letter break, Leontyne Price fell sharply breaking past the previous nether and thus turn bearish. This depicts that a bearish trend is in space. This is too validated by a rising trend line break and a rather flat top.

The support levels are nothing but the most modern and significant abide levels on the price chart.

Followers the break of the curve line, the Kagi graph declined to $149.92 and then continued lower.

Besides price action based methods, you can also use the Kagi graph to plot subject field indicators as well. In the next chart below, we have a 10-period exponential wiggling average. The trends and the price fundamental interaction with the 10-period EMA are quite evident.

A optimistic trend is clearly seen with the Kagi graph above the 10-point EMA, while a bearish trend is clear when you see the Kagi chart trading below the 10-period EMA.

Kagi chart with technological indicators

Therefore, with Kagi charts, traders can also do utilization of technical indicators much as moving averages, operating theater even oscillators such American Samoa the Stochastics or the MACD. Twenty-four hours traders should ensure that only the indicators that are supported price can work well on a chart type such as the Kagi graph.

Trading breakouts, especially from support and resistance levels is also another elbow room of victimization the Kagi chart correctly.

Trading breakouts with Kagi chart

In the future example above, you can see the support and impe&ce levels that are plotted. From the example, we can envision that when price breaks past the previous high-stepped and the resistance stage of $147.26, we rear end take a long position, targeting the resistance zone at $149.92 – $150.84.

A blow near the impe&ce geographical zone could also offer a good level to sell the wane.

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Alternately, if the monetary value of the security failed to break past the immediate electric resistance level of $147.26, then we could expect price to fall back lower, potentially towards the previously established sustenanc zone of $142.71 – $142.32 (In the above chart, we utilisation a $0.50 turnaround size).

5 – Nam differences between the Kagi chart and the candlestick graph

At that place are many differences between the Kagi and the Candlestick chart. Many of the key differentiating factors are listed down the stairs.

• A candlestick chart accounts for both time and price. Each candlestick represents one session. Nonpareil sitting could be as low as 1-minute or even 1-week
• A Kagi chart accounts only for price and does not consider time
• There are no settings involved with a candlestick chart. Merely with a Kagi chart, the reversal cost is an distinguished mise en scene to make
• A Kagi chart shows only damage apparent motion, whereas a Candlestick chart shows how Mary Leontyne Pric moved within a particular session. A candle holder chart shows the high and low prices as well, which is missing with the Kagi chart. Only closing prices are shown on the Kagi chart
• The Kagi chart plots the vertical lines connected away horizontal lines. When price breaks past a previous treble, a bullish Kagi line is drawn, patc a break blue below a previous low results in a bearish Kagi line that is drawn
• A Kagi graph can be practical to whatever market, similar to a candlestick chart
• Both Kagi and Candle holder charts originated in Japan

The next image below shows a Kagi chart to the left and the Candlestick chart to the right. This comparison gives a better view of how antithetic the Kagi and the Candlestick charts are and the fashio they behave.

Kagi Graph vs. Candle holder Graph

6 – What to watch for when exploitation Kagi charts for technical analysis?

When using the Kagi chart for technical depth psychology, day traders should ensure that they are using the right reversal size. If this place setting is besides nasal, traders will remain happening the sidelines and volition wealthy person to wait for protracted periods of time (weeks or even months) for price to describe a pessimistic or a bullish trend.

Using too small a size of it put up solution in a lot of whipsaws in the market (including spreads that needs to be considered).

Indefinite should also birth in mind that the reversal size will touch one's sell management as intimately. There is obviously a big difference between using a $1 volte-face box size or a $5 turn around boxwood sized.

The volatility of the protection is some other factor to consider. For some gargantuan detonating device stocks a $2 or a $3 monetary value apparent movement is non that difficult. While for some small capital stocks, a $1 move is the best that can be expected over a period of time.

Therefore, traders should not make the mistake of using a uniform Kagi setting for different securities.

7 – When should you use Kagi charts?

Using Kagi charts trading strategies requires a mix of both fundamentals and field analysis. For unrivaled, prison term is not a factor.

Therefore, traders will necessitate to pay close attention to how price is plotted on the Kagi graph. The base time human body also plays a important role. Obviously, a 5-careful chart shows the closing prices all 5-minutes, while a daily chart leave show off closing prices scarcely erstwhile a twenty-four hours.

To be successful with Kagi charts trading strategies, information technology is important to understand how price action works.

Having a good trading scheme hindquarters represent important for day traders. Price action based trading is too essential as you tail clearly identify patterns such as double tops and bottoms, trend lines and horizontal support and resistance lines.

Cardinal should likewise know that volume is calculated differently if you essential practice it with a Kagi chart. The volume here is based on the entire volume that is made up of the price bm.

So typically, while you will see new volume bars plotted with new Roger Sessions, with a Kagi chart, you leave see combined volume for a $1 black eye for instance.

To reason, the Kagi charts are very unique and requires a bit of understanding along how price works and how it is premeditated happening the Kagi charts. Traders testament need to be very acquainted with Kagi charts before they can await any results from this form of analysis.

Do not make the mistake that Kagi charts volition give you an edge in the markets. Price is cost, regardless of whether you are analyzing the security using a Kagi chart or a candlestick graph. The independent divergence is that away eliminating resound, a Kagi chart can help traders to see trends better.

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