What is the 'Kagi Chart'

The Kagi chart is a specialized type of technical analysis developed by the Japanese in the 1870s which uses a series of vertical lines to illustrate general levels of supply and demand for certain assets, including the price movement of rice, a core Japanese agricultural product. Thick lines are drawn when the price of the underlying asset breaks above the previous high price and is interpreted as an increase in demand for the asset. Thin lines are used to represent increased supply when the price falls below the previous low.

Example of a Kagi Chart.

BREAKING DOWN 'Kagi Chart'

On the Kagi chart, an entry signal is triggered when the vertical line changes from thin to thick and is not reversed until the thick line changes back to thin.

One important note about these charts is that they are independent of time and only change direction once a predefined reversal amount is reached. This is a sharp difference from the more traditional candlestick charts, which are rather prevalent in technical analysis. Kagi charts, being time time-invariant have the advantage of being largely free of random noise, which is a particular drawback of traditional candlestick charting methods. Because a change in price direction occurs only after a specific threshold is reached, Kagi charts have proved rather effective in signaling clear paths of price movements.

The day-to-day price fluctuations of securities can make it extremely difficult for traders in the financial markets to determine the true trend of an asset. Luckily for traders, methods such as Kagi charting have helped put an end to focusing on unimportant price moves that do not affect future price momentum.

We offer a deeper dive into using Kagi charts here.

RELATED TERMS
  1. Daily Chart

    A line graph that displays the intraday movements of a given ...
  2. Forex Charting Software

    Forex charting software aids traders in analyzing price trends ...
  3. Reversal

    A change in the direction of a price trend. On a price chart, ...
  4. Red Candlestick

    A red candlestick represents a downward price movement where ...
  5. Vertical Line Charting

    A technique used by technical traders and market technicians ...
  6. Linear Price Scale

    A linear price scale is a type of scale used on a chart that ...
Related Articles
  1. Trading

    A Look At Kagi Charts

    This relatively unknown tool could help you find an asset's trend faster.
  2. Trading

    Trading Without Noise

    False signals can drown out underlying trends. Find out how to tone them down and tune them out.
  3. Trading

    Introduction to Swing Charting

    Discover why traders use swing charts, how these charts are constructed and how to start using them.
  4. Trading

    Tips for Stock Charts That Enhance Your Analysis

    Find out how to create well-designed charts that will enhance your market analysis.
  5. Investing

    Point And Figure Charting Basics

    Learn how to construct and read these price charts designed to highlight entry and exit points for longer-term positions.
  6. Investing

    Blending Technical and Fundamental Analysis

    Find out how you can combine the best of both strategies to better understand the markets.
  7. Trading

    What Your Trading Charts Aren't Telling You

    You may be missing some key statistics when following charts in the market.
RELATED FAQS
  1. What are the differences between a bar chart and candle sticks?

    Explore the difference between bar and candlestick charts. Learn how technical analysts use charts in the analysis of supply ... Read Answer >>
  2. What Does It Mean When There Is 'Price Action'?

    Price action refers to the day-to-day fluctuation in the price of an asset. Read Answer >>
  3. What do the different colored candlesticks mean?

    A typical candlestick chart is composed of a series of bars, known as candles, which vary in height and color. Read Answer >>
  4. How do I start using technical analysis?

    Technical analysis is a method of analyzing securities by evaluating current and historical price and/or volume activity. ... Read Answer >>
Hot Definitions
  1. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  2. Current Assets

    Current assets is a balance sheet account that represents the value of all assets that can reasonably expected to be converted ...
  3. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  4. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  5. Cost of Debt

    Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure.
  6. Depreciation

    Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account ...
Trading Center