- The goal of the kagi chart is to catch longer term trends.
- As mutual fund prices are based only on the closing price
and candlestick charts require the open, hi, low and closing prices. Japanese charts, like
Kagi, are particularly useful for analyzing stock mutual funds.
- Using a kagi, it is easy to obtain an insight into who ha
sthe balance of power- the bulls or the bears.
- Easy to interpret, buy when line goes from thin to thick
and sell when the line goes from thick to thin.
Kagi charts display a series of connecting vertical lines where the thickness and
direction of the lines are dependent on the price action. If closing prices continue to
move in the direction of the prior vertical Kagi line, then that line is extended.
However, if the closing price reverses by a pre-determined "reversal" amount, a
new Kagi line is drawn in the next column in the opposite direction. An interesting aspect
of the Kagi chart is that when closing prices penetrate the prior column's high or low,
the thickness of the Kagi line changes.
Important Bibliography: Of all the text books that described Japanese Charting techniques.
We found the best to be:
- "Beyond Candlesticks", written by Steve
Nison. John Wiley Sons, Inc., New York, NY, 1994
We strongly encourage the use and reading of this book as
it fully describes Japanese Charting techniques with pattern analysis and illustrative
A Kagi chart is depicted in the following figure:
Kagi charts are always based on closing prices.The general rules for calculating a kagi
There are other rules and
considerations when building Kagi charts. If you want to know the specifics, We strongly
encourage you to obtain a copy of "Beyond Candlesticks", written by Steve
Nison. John Wiley Sons, Inc., New York, NY, 1994. ISBN 0-471-00720-X
- The first
closing price in a kagi chart is the "starting price."
To properly construct a kagi chart a reversal
amount must be chosen. This is the minimum price movement that is needed before a
new reversal line can be drawn in the next column.
To draw the first kagi line,
todays close is compared to the starting price.
- If todays price is greater than or equal to the starting price, then a thick line
(yang) is drawn from the starting price to the new closing price.
- If todays price is less than or equal to the starting price, then a thin line
(yin) is drawn from the starting price to the new closing price.
- To draw subsequent lines, compare the closing price to the
tip (i.e. bottom or top) of the previous kagi line:
- If the price continued in the same direction as the previous line, the line is extended
in the same direction, no matter how small the move.
- If the price moved in the opposite direction by at least the reversal amount
(this may take several days), then a short horizontal line is drawn to the next column and
a new vertical line is drawn to the closing price.
- If the price moved in the opposite direction of the current column by less than the reversal
amount no lines are drawn.
- If a thin kagi line (yin) exceeds the prior high point on
the chart, the line becomes thick (yang). Likewise, if a thick kagi line (yang) falls
below the prior low point, the line becomes thin (yin).