Point & Figure Charts

The Point and Figure ( PF ) charting method is a technique that has been used for many years in analyzing the variations in prices of stocks and commodity futures. There are several types of PF charting methods. Some employ trend lines, resistance levels, and various other additions to the chart. In this example we will use the daily reversal type charts. The principal advantage of a Point and Figure chart is that it is much easier to read and interpret than other types of charts. All the small, and often confusing, price movements are eliminated, and only the most important features of the price action remain. It would be reasonable to think of this method as a filter that (hopefully) allows only meaningful information to enter the chart and ultimately the decision process. Two basic symbols are used:

X - Denotes the continuance of an increase in price and is always "stacked" in the vertical direction.

O - Denotes the continuance of a decrease in price and is always "stacked" in the vertical direction.

While prices are rising X's are used. When falling, O's are used. They are always plotted on rectangular grid graph paper such that columns of X's and O's alternate. A Point and Figure chart is characterized by the specification of two parameters: box size and reversal number. The box size dictates the price range associated with a particular box (cubical area within the grid), while the reversal number specifies the conditions which terminate a column of X's and begin a column of O's and vice-versa.

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