Kagi Charts: Reversal Thresholds and Trend Signals
Summary
The document introduces Kagi charts, a price-focused representation in which the horizontal time spacing is not uniform. Vertical segments track price movement, while horizontal inflection segments connect changes. Direction and color reflect whether price continues, reverses by a preset threshold, or breaks a prior high or low. The accompanying indicator description supports reversal thresholds specified either as a percentage of price or as a fixed number of points or pips, with one setting disabled when the other is used.
Two possible trading approaches are outlined: act on color changes as buy or sell signals, or wait for two or three subsequent breaks to confirm the change before taking a position. The material explains the chart logic and presents an indicator implementation, but gives no historical performance tests, instrument-specific guidance, or rules for sizing and risk management. Threshold choice therefore remains a practical limitation: signals depend on the selected reversal amount, and the document does not establish that either entry approach is profitable.
Key ideas
- Kagi charts encode price movement with nonuniform time spacing, emphasizing trends and reversals.
- A preset price reversal threshold determines when a segment changes direction.
- Color and direction changes can reflect reversals or breaks of prior highs and lows.
- Traders may act on color changes directly or wait for additional break confirmations.
- The document provides no performance evidence, and results depend on the chosen threshold.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.