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Point and Figure (or P&F) charts pay no attention to time, only showing price changes. Instead of time on the x axis and price on the y axis, P&F charts show price changes on both axes, which basically shows the underlying supply and demand for a security typically using 'X's and 'O's. A column of Xs suggest a rally (demand is leading supply) while a column of Os suggests a fall (supply is leading demand). Short columns imply that supply and demand are fairly matched. Day trading systems using point and figure techniques are fairly rare, due to th eneed to learn a new charting method, and become totally familiar with it. Popular Point and Figure chart patterns include Double Tops and Bottoms, Bullish and Bearish Signal formations, Bullish and Bearish Symmetrical Triangles and so on. To create a Point and Figure chart, mark an "X" when prices rise by the "box size" (user specified, allowing you to set the sensitivity). Mark an "O" when prices fall by the box size. No Xs or Os are drawn if prices fail to move by at least the box size. Columns contain only Xs or Os, never both. To start a new column (for example to switch from an X column to an O column), prices must reverse by your "reversal amount" (another user specified value) multiplied by the box size. E.g a box size of 5 points and a reversal amount of 3 boxes means prices must reverse 15 points before you can start a new column. This changing of columns means the trend has changed. |
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