Hong Kong Economic Time --- June 7, 2000

Dynamics of ProSticks^®

Last time we pointed out that traditional Bar and Candlesticks charts display only the daily open, high, low, and close prices. As such, they do not provide a detailed picture of the actual market activities that took place throughout the day. On the other hand, ProSticks^® analyzes the daily price/volume distribution and thus is able to provide the investor with a better picture of the overall structure of the market by using its three parameters: Active Range, Modal Point, and Extreme Tails.

The above pictorial shows a typical rising Candlesticks bar on the left with its corresponding ProSticks bar on the right. What can we infer from the Candlesticks bar ? The Candlesticks bar shows that the market opened at 200, dropped momentarily to the day low of 195, then rallied to a day high of 220. It then closed near 215. This information is all that is available to us from simply looking at the Candlesticks bar.

On the other hand, consider the corresponding example of a ProSticks bar which offers a a more dynamic picture. The market opened at 200, dropped momentarily to 195, consolidated around the 200-205 for a long time with the most transactions taking place at 207. Then suddenly, the market surged to the day high of 220. However, the surge is not accompanied by heavy volume and thus, this rise most likely took place late in the afternoon where it is easy for big money players to manipulate the price movement of a stock. After rising to 220, the market experienced substantial resistance and the price retraced quickly to close at 215.

Thus, on bars with similar physical features, the ProSticks bar offers dynamic information and insights into the underlying structure and activities of the market that one cannot find on a Candlesticks bar, and on any other traditional bar for that matter.

From tomorrow onwards, we will consider some of the applications of the ProSticks bars. We will also demonstrate how they are correlated to daily market movements in a subtle way.

Please note that ProSticks® is not a trading system. It does not provide one with trading signals. It is simply an enhanced charting method, with an attempt to summarize as much information of daily market activities as possible on a two-dimensional graphical space. However, with its additional parameters, coupled with the traditional open, high, low, and close prices, an entire new trading perspective is opened. New trading theories and indicators will be generated by the technical community. Everyone can interpret the chart in their own way, develop their own trading strategies, and formulate their own technical tools. This is the ultimate mission of ProSticks.com Limited.