Price Chart

last updated June 17, 2014

Price chart is an alternate form of the moving average indicator therefore considered a trend-following indicator. When price or short average crosses the long average, then, the Price chart gives a signal.

• The Price Chart, like all  trend-following indicators,  works best when the price is in a strong uptrend or a downtrend.
• Price Chart, like all trend-following indicators, is useless when the market moves sideways trendlessly.
• Disclaimer: No technical indicator can assure profits. As market conditions change, the interpretation and use of the indicator must change.

The P Chart draws a red distribution-adjusted line of total return, a long purple moving average, and a short yellow moving average on the chart.

• There is no provision for more than one issue to be displayed on the P Chart.
• Set the short parameter = 1 to make the yellow average disappear.
• If you enter a longer value in the short parameter than in the long parameter, then the signals will work in reverse.
• All moving averages used in P Chart  are exponential averages of the adjusted closing price.

General Interpretation of the P Chart

When the red line, or the short-average, is above the long average, the issue is in an uptrend and should continue to be held. When the red line, or the short-average, is below the long average, the issue is in a downtrend and should be avoided.

Volatility Control

For volatile issues that give too many trading signals, increase the length of the averages, and/or increase the length of the trading delay.

The Purple and Yellow Values

These values tell the value of the average on any given day. These values display either as adjusted or unadjusted values depending on the settings on the Chart's right-click Menu.

Strengths and Weaknesses

The P Chart is FastTrack's best tool for finding trend starts and ends. Once a long, strong moving average has been broken on the P Chart, stop using the P Chart and begin using a trading-range indicator like the I Chart and the S Chart.

Parameters

The P Chart has two parameters which can be changed in the Parameter settings dialog box. Parameter Short Avg is the length in days of the short yellow moving average. Parameter Long Avg is the length in days of the longer purple moving average. The yellow line crossing the purple line moving upward, creates a BUY tic. The yellow line crossing the purple line moving downward, creates a SELL tic.

If the parameter values are identical, then only the red line and purple line are charted. In this case, the BUY/SELL signals occur when the red line crosses the purple line.

What does this mean to me?

Moving averages are best suited for finding the end of a long, strong trend. Once the end has been found then, STOP using trend-following indicators and start using trading-range indicators. For more detail, see the discussion of timing indicators.