A guide to trade a point and figure chart. Find out how to trade the oldest market theory. Use point and figure patterns to trade effectively! P&F Chart Pattern Trading System - Learn to Use Technical Analysis & Chart Patterns For Stock Trading & Value Investing. The point and figure chart is very unique as it does not plot prices against time like other technical analysis charts. Volume is also not taken into account. FOREX NEWS STATISTICS

This value is created by multiplying the box size by another user defined value, the Reversal Amount. The reversal amount is the number of bricks price must move in order for a new letter to be drawn or a new column to be created.

There are two rules regarding the letters and columns. Each column has to be either X's or O's. There can never be two different letters in the same column. X columns and O columns will always alternate. You will never see two X columns side by side and vice versa.

Box types There are four different types of lines that can be drawn within a PnF Chart. Up Bars — Form during an uptrend. Down Bars — Form during a downtrend. Projected Up Bars — During an intraday timeframe, a potential up line that would form based on current price before actual closing price is set. Projected Down Bars — During an intraday timeframe, a potential down line that would form based on current price before actual closing price is set. The ATR is used to filter out the normal noise or volatility of a financial instrument.

It calculates what the ATR value would be in a regular candlestick chart and then makes this value the reversal distance. Traditional — Uses a user-pre-defined absolute value for the box size and reversal amount. New boxes are only created when price movement is larger than the pre-determined reversal amount.

The upside to this method is that it is very straightforward and it is easy to anticipate when and where new boxes will form. The downside is that selecting the correct box size for a specific instrument will take some experimentation. Uses of Point and Figure Charts As with the other previously mentioned noise filtering charts, Point and Figure Charts are gaining in popularity because they do not factor in time or minor, naturally occurring price movements.

Proponents of these types of charts believe that this characteristic makes it easier for users to spot trends and anticipate future price movements. For example, Point and Figure charts are great for visualizing trend lines, support and resistance levels and breakouts. The point and figure chart is very unique as it does not plot prices against time like other technical analysis charts. Volume is also not taken into account, so it is basically a chart based purely on price movements.

The diagram below shows a simple Point and Figure chart. This chart and its associated techniques are more than a century old and are now used by many traders as part of their technical analysis toolkit. In the diagram above, the "X"s indicate rising prices while the "O"s indicate falling prices.

Notice that the "X"s and "O"s are always in different columns. Basically, each time the price changes by a certain amount in the opposite direction, it is plotted in a new column. If the price is moving in the same direction, it is plotted in the same column. Now the price movement starts to reverse in trend.

At this point in time, nothing is plotted on the chart. In a Point and Figure chart, a reverse in trend requires the price to rise by a certain amount. Let's assume for now that it requires the price to rise by 3 or more boxes before an "X" is plotted. Three "X"s indicated by the red box will be plotted on the chart. They are the Box Size and the Number of Boxes.

Box Size The size of the change in prices before plotting an "X" or "O" is plotted. By defining a box size, small changes in price are not reflected in the chart. This allows small fluctuations or noise to be filtered out from the chart. When plotting the point and figure chart, the direction of the price is always taken into consideration. For example, in an upwards trend, an "X" will be added if the price rises beyond the box size. In a downward trend, an "O" will be added if the price falls below another box size.

In an upward trend, to plot an "O" of the reverse direction, it requires significant movement in the opposite direction before the trend is considered to have reversed. The number of boxes here is for specifying the amount or the number of change in boxes in the reverse direction before an "O" is plotted. For example, if we provide 3 as the Number of Boxes for Reversal, during an upward trend, it requires a negative change in price of 3 boxes before an "O" is plotted. This is the same for the downward trend.

An increase in price equivalent to 3 boxes is required before an "X" can be plotted. When the reverse trend is met, three consecutive "X"s or "O"s are plotted. The reverse in trend is plotted in a new column. The diagram above shows the price is initially in an upward trend.

Then prices started to fall by 3 or more boxes.

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How to use Point and Figure Charts (Point and Figure Charting Tutorial)

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