Kagi charts are
a Japanese invention and date from the late 1870's, but were popularised
in the western world by Steven Nison. They are formed of a series
of connecting vertical lines where the thickness and direction of
those lines depend on price (time plays no part in Kagi Charts).
Thick lines show that demand exceeds supply (bullish). Thin lines
mean supply exceeds demand (bearish). As long as prices continue
to move in the same direction, the vertical line is keeps growing.
If price reverses by a set "reversal amount", a new kagi line is
drawn in a brand new column. The penetration of a previous high
or low alters the thickness of the lines. The basic way to trade
Kagi is to buy if the kagi line changes from thin to thick and sell
if the kagi line changes from thick to thin. Kagi charts are likely
to be of limited use when Day trading, as existing charts already
do a good job, and the time required to learn to 'read' such a chart
may not be worth the effort, even if your software supports them.
From the first closing
price, if today's price is greater than or equal to the closing
price, draw a thick line from the closing price to today's closing
price, otherwise draw a thin line from the closing price to the
new closing price. Subsequently, compare the closing price to the
top or bottom of the previous kagi line. A new kagi line is started
if price reverses by a set 'reversal amount' to the new closing
price, otherwise no lines are drawn.