Definition
The Kagi chart is a chart used for tracking price movements and to make decisions on purchasing stock. It differs from traditional stock charts such as the Candlestick chart by being mostly independent of time. This feature aids in producing a chart that reduces random noise.
Kagi Chart
What is ‘Kagi Chart’
A type of chart developed by the Japanese in the 1870s that uses a series of vertical lines to illustrate general levels of supply and demand for certain assets. Thick lines are drawn when the price of the underlying asset breaks above the previous high price and is interpreted as an increase in demand for the asset. Thin lines are used to represent increased supply when the price falls below the previous low.
Explaining ‘Kagi Chart’
An entry signal is triggered when the vertical line changes from thin to thick and is not reversed until the thick line changes back to thin.
One important note about these charts is that they are independent of time and only change direction once a predefined reversal amount is reached.
Further Reading
- Some Less Known Charting Methods of Technical Analysis and Possibilities Its Using for Identification Trend Changes – ideas.repec.org [PDF]
- Pairs trading based on statistical variability of the spread process – www.tandfonline.com [PDF]
- Time Evolution of Fractal Structure by Price-axis Scaling and Foreign Exchange Intervention Operations – link.springer.com [PDF]
- Mineralogical characterization of graphite deposits from Thodupuzha-Kanjirappally belt, Madurai Granulite Block, southern India – www.sciencedirect.com [PDF]
