Building swing charts from perceptually important points

Build the swing chart as a cutoff zigzag

A swing chart is a reduced map of peaks and troughs that turns OHLC structure into discrete legs a chartist can treat as the working skeleton of a market. One way to build that map is to discard moves below a chosen point or percent cutoff and connect the remaining peaks and troughs as legs.

That filter is a zigzag: it connects swings larger than a cutoff, and the most recent one or two zigzag legs are typically unfinished. Those last legs can change substantially once later bars are included.

Because the last legs rewrite with new data, a completed zigzag history is a hindsight map. It cannot be treated like a contemporaneous moving average or oscillator.

A rigid cutoff can miss what the eye marks

A rigid amplitude cutoff can skip a visually decisive pivot when a nearby extreme is only slightly deeper. The mechanical swing map and the eye's map can then diverge.

The same percent cutoff does not travel cleanly across chart scales. A 20% threshold that often isolates major stock swings on long-term daily charts can miss or overstate structure on shorter-term daily charts.

One construction workaround is to set the cutoff as a percentage of the visible high-minus-low range instead of using one fixed threshold for every chart.

Freezing unfinished legs changes the plot

Removing the unfinished-leg rewrite produces a more stable trend-style signal with fewer flips. That same freeze makes the plot unable to mark the prominent peaks and troughs visible in a current snapshot.

Editorial: freezing the last legs can reduce flips, but the plot then stops being a swing chart of the peaks and troughs a chartist can see in the current window.

Use perceptually important points for later tests

A swing construction closer to visual perception selects perceptually important points rather than only threshold-cleared extremes. Those points are pivots chosen because they stand out in a chart snapshot, not only because they clear a fixed point or percent threshold.

Once the swing chart rests on those pivots, a trendline can be drawn through selected swing pivots to state a directional hypothesis that later price action can confirm or break. A breakout is a move through a constructed swing or trendline boundary that tests whether the mapped structure still governs later price. Later trendlines and breakout tests can then rest on pivots a chartist would actually treat as structure.

Editorial: if the swing map does not match the pivots a chartist would mark, later trendline and breakout tests are checking a different structure from the one the eye is using.