Kagi charts are plotted with vertical and horizontal lines. The vertical lines show the direction of a price movement, and the horizontal lines show a reversal.
As long as the price does not change direction, the Kagi line is drawn into the same direction (up or down) as new prices come in. When the price changes direction, a reversal takes place only when the price change exceeds the filter amount. At each reversal, a horizontal line is added to the chart and the line continues vertically into the new direction.
In addition, a Kagi line can be thick or thin. If a Kagi line is thin, it will change to a thick line when the price moves above the previous high (shown by the horizontal line at the reversal). If a thick Kagi line falls below the previous low, the line turns thin again. The change from a thick to a thin line is generally thought to generate a sell signal, whereas the change from a thin to a thick line generates a buy signal.
Like Point and Figure charts, as well as Three Line Break and Renko charts, the Kagi charts are plotted independent of time. If in the chosen period (data compression) the price change is not enough to either continue the current line or cause a reversal, then nothing will be drawn on the chart. Therefore, it is important what filter amount is chosen for reversals. Initially, this value is set automatically according to the symbol displayed in the chart document, but you can of course change it in the chart properties.
Kagi charts were originally developed and used in Japan. To find more detailed information about them, see for example Steve Nison: Beyond Candlesticks. John Wiley & Sons, 1995.
Tip We recommend to change the chart properties setting under General > Time Region to a fixed period when using Kagi charts. If you use a dynamic time region, for example a fixed number of records, the Kagi chart will be recalculated every time a new record is added and the oldest record is taken out of the chart. Therefore, the display of historical data in the chart could vary over time, as it also depends on the initial data in the chart. Use the option Period (from-to) to avoid this.
▪ Right-click on the Kagi chart and choose Properties.
▪ On the left side of the dialog, select the name of the chart pane, the name of the symbol and then Display. For example: Pane 1 > DAX > Display.
▪ On the right side of the dialog, choose Price Step to enter the absolute value that the price has to move into the opposite direction before a reversal takes place, or choose Percentage to enter the filter amount as a percentage.
Note You can save your settings as default for the current symbol and data compression by clicking the Set As Default button.