Kagi chart

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Kagi chart for the EUR / USD currency pair; Reversal amount: 20  pips .

The Kagi chart is a diagram that is used in technical analysis to display and analyze the price development of an underlying asset, e.g. B. a share is used. Kagi charts differ from classic charts such as line or candlestick charts mainly in that they do not have a (linear) time axis, but only depict price movements.

In Japanese, the word Kagi describes an L-shaped key, which is why Kagi charts are also known as key charts . Furthermore, hook chart or hook chart is known because the change in direction in the chart is similar to a small hook.

Critics doubt whether the analysis based on Kagi charts - like technical analysis in general - is able to achieve an excess return.

history

Kagi charts are believed to have been developed and used in Japan in the 1870s, when stocks began to be traded on Japanese stock exchanges. Originally they were used to forecast the price development of rice and then found more general use.

In the western world, Kagi charts were largely unknown for a long time - just like Renko charts , etc. a. It was not until the mid-1990s that Steve Nison and his standard work Beyond Candlesticks made them popular in the West. Today, Kagi charts can be created and displayed with common charting software, even within trading platforms.

Methodology for creating the chart

A Kagi chart consists of a series of vertical lines based solely on the closing prices of the listed security under consideration . The time factor is ignored. The vertical lines have one direction and alternate from top to bottom and vice versa. A new vertical line (and thus a change of direction) is started if a closing price differs from the previous one by more than a predefined reversal amount . Otherwise there is no change of direction; the current line may only be extended in its direction, depending on the amount of the closing price.

When changing direction, the new vertical line is placed on the right and connected to the previous one by a short horizontal line - the inflection line .

The line width is either thick ( Yang line ) or thin ( Yin line ). The extreme values ​​of the previous vertical line are decisive for a change in line thickness:

  • A yang line changes to a yin line when it reaches or falls below the low of the previous vertical line.
  • A yin line changes to a yang line when the high of the previous vertical line is reached or exceeded.

The lines are also usually colored for better representation: Yin lines are red; Yang lines blue or black.

The reversal amount relevant for the chart construction is given either as an absolute or percentage or as a function of the Average True Range (ATR) - an indicator of volatility . A common value is a reverse amount of 4 percent.

interpretation

Simple buy and sell signals are based on the basic principle “buy the yang line and sell the yin line.” For analysts, those points in the chart at which the line thickness changes are relevant. It is common in trader's practice to wait for one or more confirmations of a buy and sell signal before actually following the signal.

See also

literature

  • Steve Nison: Beyond Candlesticks: New Japanese Charting Techniques Revealed . 1st edition. John Wiley & Sons, New York 1994, ISBN 978-0-471-00720-3 (English).
  • John Craciun: Renko, Kagi, Three Line Break: Successful trading with Japanese trend charts . 1st edition. FinanzBook Verlag, Munich 2009, ISBN 978-3-89879-339-1 (English: The Reversal Charts . 2003.).
  • Ralf Goerke: Kagi Charts - the key to the stock exchanges . In: Traders . No. December 12 , 2010, ISSN  1612-9415 , p. 76-78 .

Web links

Individual evidence

  1. ↑ Thimmaraya Gowda: Kagi charts. (No longer available online.) In: Stock-Trading-Infocentre.com. Archived from the original ; accessed on November 6, 2016 .
  2. ↑ Kagi Chart. In: Investopedia. Retrieved August 3, 2019 .