Reversal Amount (Point & Figure Chart)

Reversal amount is the number of "boxes" the price must move against the current trend, either up or down, to be considered a reversal (for example, to reverse from a column of Os to a column of Xs, or vice versa). A reversal amount of 3 is recommended and then increase or decrease this value as necessary.

For example, assume the price of an asset you are following is rising and your chart is currently plotting a column of Xs. Your box size is 10 and your reversal amount is set to 3 and the price is currently 110. In order for another X to be drawn on the chart, the market must move to 120 points or higher. If the price continues at 110 or under 120, no new Xs are plotted. The only way to plot a new column of Os is if the price falls to 80 or below (30 point reversal or 10 (box size) x 3 (reversal)). As long as prices remain between 81 and 119, there are no new plots on the Point & Figure chart.