P chart is a form of the moving average indicator, therefore considered a trend-following indicator. When price or short average crosses the long average, then, the P chart gives a signal.
- The P Chart, like all trend-following indicators, works best when the price is in a strong uptrend or a downtrend.
- P Chart, like all trend-following indicators, is useless when the market moves sideways without a trend.
The P Chart draws a red dividend adjusted total return line, a purple long moving average, and a yellow short moving average on the chart.
- The P Chart show only data for the red ticker
- If you enter a longer value in the short parameter than in the long parameter, then the signals will work in reverse.
- All moving averages used in P Chart are exponential averages of the adjusted closing price.
Moving Average General Interpretation
When the red line, or the short-average, is above the long average, the issue is in an uptrend and should continue to be held. When the red line, or the short-average, is below the long average, the issue is in a downtrend and should be avoided.
Using Moving Average to Manage Volatility
For volatile issues that give too many trading signals, increase the length of the averages.
The Purple and Cyan Values
These values tell the value of the average on any given day. These values display either as adjusted or unadjusted values depending on the settings on the Chart’s right-click Menu.
Strengths and Weaknesses
The P Chart is FastTrack’s best tool for finding trend starts and ends. Once a long, strong moving average has been broken on the P Chart, stop using the P Chart and begin using a trading-range indicator like the I Chart and the S Chart.
The P Chart has two parameters which can be changed in the Parameter settings dialog box. Parameter Short Avg is the length in days of the short yellow moving average. Parameter Long Avg is the length in days of the longer purple moving average. The yellow line crossing the purple line moving upward, creates a BUY tic. The yellow line crossing the purple line moving downward, creates a SELL tic.
If the parameter values are identical, then only the red line and purple line are charted. In this case, the BUY/SELL signals occur when the red line crosses the purple line.