What Are Kagi Charts & How To Trade Them

Kagi Charts

The Kagi charts are a form of technical analysis that describes different price movements. It was developed in the 1870s by the Japanese to measure the supply and demand of rice prices.

What are the Kagi charts?

The structure of Kagi charts consists of a series of vertical lines. These lines depend on the asset’s price rather than time, like in bar or candlestick charts. In addition, these lines vary in size. Some are thick, and others are thin. These lines’ thickness and thinness are the most important factor of the Kagi charts, as they give trading signals.

Thick lines appear when an asset’s price is higher than the previous price, and it’s a signal that there is a strong demand for a certain asset. On the other hand, thin lines emerge when the price of an asset is lower than the previous price, and it signifies an increased supply of a particular asset.

Two of the most important points of the Kagi charts is that it is time-independent, and the lines move in a specific way. The time-independence means that the Kagi lines plot according to the price of an asset. When the lines form, they make a certain movement. For example, if the market is in a downtrend, instead of showing various lines, the Kagi will only show a single downward line. After that, if a price show reversal, another line in an upward direction will emerge.

This is what a Kagi chart looks like:

Kagi chart
Kagi chart

How to use Kagi charts?

On the Kagi charts, an entry point occurs when a traded asset’s price changes its direction from a thick line to a thin line. As already mentioned, thick lines represent a sharp demand in the asset’s price, so traders may look to take buy positions after their appearance with a stop-loss close to an entry point. Conversely, thin lines illustrate a strong supply in the asset’s price, and traders could look to take sell positions after their formations, with a stop-loss close to an entry point.

Buy and sell entry points on the Kagi chart
Buy and sell entry points on the Kagi chart

Like candlesticks or bar charts, the Kagi charts are a graphical illustration of price movements, so traditional patterns can sometimes be established on the Kagi. With the appearance of these patterns, traders can fully utilize the Kagi for their trading strategies.

One of the benefits of the Kagi is that it filters market noise by ignoring the time. The price fluctuations make price trends much more difficult. By applying the Kagi lines, a trader can screen some of the unimportant signals.

Kagi charts trading strategy

When trading with the Kagi lines, a trader may wish to first find the long-term price of an asset to ensure that they are trading in the direction of the trend.

Kagi charts buy strategy

  • Identify a thick line in an uptrend or downtrend.
  • Wait for a thick line to form.
  • Enter right after the appearance of a thick line.
  • Place a stop-loss near the recent low from the entry point.
  • Exit the trade when a thin line starts to emerge.

Kagi chart sell strategy

  • Locate a thin line in an uptrend or downtrend.
  • Wait for a thin line to form.
  • Enter right after the appearance of a thin line.
  • Place a stop-loss near the recent high from the entry point.
  • Exit the trade when a thick line starts to emerge.

Kagi charts conclusion

Since their inception in the Japanese rice markets, Kagi charts have come a long way. Unlike the candlestick charts, they filter any market noise by relying on the asset’s price rather than time. Surprisingly, not many traders know about Kagi charts. This is probably because they are not included by default in most forex trading platforms.

Becoming a successful forex trader can take many years of practice. It is not easy to make a living from forex trading in my opinion. It will require immense trading discipline, good money management, and a bullet proof trading plan.

Furthermore, I would combine multiple technical analysis, fundamental analysis, price action analysis and sentiment analysis to filter all forex trading signals whatever forex strategy I was using.

The methods of trading forex that are outlined within this article are just ideas. You should trade forex in a way that suits your own individual style, needs and goals.

If you would like to practice forex trading online, you can open an account with a forex broker and download a trading platform completely free of charge. If you are looking for a forex broker, you may wish to view my best forex brokers for some inspiration.

Happy trading!