Trading Techniques  |  APR 2000

Kagi Charts by Jayanthi Gopalakrishnan

Kagi Charts by Jayanthi Gopalakrishnan If you’ve 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. 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 chart’s 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.

by Jayanthi Gopalakrishnan