Kagi Charts by Jayanthi Gopalakrishnan
If youíve ever seen a reference to this particular form of
candlestick charting and wondered what they were, you can
find out here.
The financial markets exist because of the complementary
relationship between bulls and
bears -- one cannot exist without the other. The key is to
recognize which has control
of the markets and identify
when that control changes.
One way to do this is through
Kagi charts, which have
also been known as key charts,price range charts, hook
charts, delta charts, and string charts, originated in Japan in
the 1870s about the same time as the more popular candlestick charts. The only variable that is considered in kagi
charts is the closing price, and the indication of bullish/bearish markets is determined by the thickness of the lines.
Initially, when I first began
to work with it, I found the
kagi chartís unfamiliar display confusing. I found it difficult to determine what the
closing prices were and
whether the specific security
was trending or in a trading
range. But the ambiguity intrigued me, encouraging me
to explore this type of chart
further. That led me to discover that kagi charts were an
interesting method by which
to identify trends, support/resistance levels, and reversals.
Although there are software
packages that will automatically display kagi charts, I will
explain the process of creating these charts so that it is
easier to understand them and
to make trading decisions using them. One thing to keep in
mind is that kagi charts are
effective in trending markets;
this is because they do not
identify peaks and troughs.