Forex charts: Kagi chart

Kagi chart  is one of the ways how quotes of financial instrument (currency, good, security) may be rendered. This Forex chart shows change of price as vertical line of various thickness linked with horizontal lines. Kagi chart line follows price in one direction until tendency changes. Upon breakup of tendency, price moves to the right and a new Kargi line is built in the opposite direction, the second line is connected with the previous, horizontal bridge in the reversal point.

How to build Kagi Forex Chart

While working with Kargi Forex charts, we will see that changes are entered each time when the price leaves the limits of the previous price or certain distance to the opposite direction is passed. Prior to building chart, below parameters should be taken into account:

• Price target – basis price for the chart. More often your time-frame close price is used (for instance, closing hour). Sometimes high and low price is taken. In this case high is taken for upward movement and low is taken for downward movement.
• Reversal parameter, threshold amount – the distance the price must pass in the opposite direction from the previous fixed value to make the direction of Kargi chart line change (a new vertical line started to form) More often it is set in points (if currency price is higher, it is recommended to take value) or in % from current price (for example, 5%)

If the price moves in the direction of previous vertical Kagi line, then the line will be prolonged. If the price moves the opposite direction, in this case nothing is rendered until it passes threshold distance.

Apart from that, Kagi line can change its thickness. When thin Kagi line exceeds highest point of the previous value, the line gets thicker. If thick Kagi line moves downward and gets below the previous bottom point, the line gets thinner.

Interpretation of chart in the terms of Yin and Yang:

• Yin – thin line
• Yang – thick line
• Waist – connection of decline line with growth
• Shoulder – connection of growth line with decline

In case Yin exceeds previous shoulder, exceed of Yang takes place. If Yang is lower than the previous waist, conversion to Yin takes place.

Any vertical line can contain uncertain duration. If the price moved within a certain range, did not drop down and did not grow for threshold value, then the chart remains unchanged.