Three Line Break Chart

Three Line Break Chart
Three Line Break charts originated in Japan like the Candlestick Charts. They are related to Kagi and Renko charts.

A Three Line Break chart consists of vertical lines ("boxes") connected to each other. The direction of the lines is drawn based on price movements. The time relation, trading volume and chart information such as high and low prices are not taken into account.

Three Line Break charts are especially useful for detecting changes in trends.

Construction and Information in a Three-Line-Break Chart

A Three Line Break chart differs from traditional chart types.
  • In principle, a new line is drawn when the price exceeds the previous price's high or low. If the price does not exceed the price benchmarks of the day before, no line is drawn.
  • For a "Three Line Break", the same rule applies; however, after three lines of the same color, the price must reverse the amount of the last three lines to cause a trend change in the graph. Price movements that lead neither to a reversal nor to a line of the current direction are ignored.
The number of lines taken into account for the break is given by the Reversal parameter. For short-term trades it might be smaller than 3, for long-term trades 4 or higher. The setting "3" is the default value that gave the method its name. Please note that the Reversal parameter gives the number of lines to be taken into account, not a fixed price value as for the related methods Kagi and Renko. Therefore, the price at which the trend change occurs in the chart is relative.

The time elapsed is unimportant for this kind of charting. The time axis is not linear.

Lines (boxes) of downward and upward direction are displayed in different colors, e.g. black/red. The colors can be set in the properties.

For a Three Line Break chart, a typical 'buy' signal is a trend change after three downwards lines, while a 'sell' signal is a trend change after three upwards. Remember that the filtering effect inherent to the method leads to delayed signal generation.

General Chart Properties

When the chart is active, you can edit the chart properties in the toolbox, for example the history length, the axes and legends.

You can also

Content-Dependent Chart Settings

In the properties of the displayed stock (symbol), you can find additional parameters. Besides the Standard Properties, you can find specific parameters for this chart type.

Instrument Properties

Reversal - Enter the number of lines to be taken into account for determining trend reversals.

Input - Select which data to use for calculating the chart (Open, High, Close, Low, Volume).

Three Line Break Properties

Border Color - Here you can select a color for the line border.

Bullish Color - Here you can select a color for the bullish line.

Bearish Color - Here you can select a color for the bearish line.

Links and Books

Beyond Candlesticks - Steve Nison