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Point & Figure Chart

Point & Figure (P&F) charts have been used as far back as the late 1800's. This charting method focuses on price changes by eliminating time and volume; informing traders where price is relative to prior levels. Keeping this in mind, traders can decide whether today's price represents a continuation of a trend, a reversal or a breakout so that they may profitably trade the market tomorrow. In addition, Point & Figure charts filters out time and insignificant price changes, leaving you with a chart that contains only price movements that are relevant to you. These chart types differ from bar charts in two important ways:

Price changes are plotted as a series of vertical columns where up-trends are displayed as a column of Xs and down-trends are displayed as a column of Os. A column of Xs shows that demand is exceeding supply (a rally), and a column of Os shows that supply is exceeding demand (a decline).

How a Point & Figure Chart is Built

Point & Figure charts can be built based using the High/Low Range or the Close of the underlying data.

High/Low Range Basis

This construction method uses the High or the Low depending on the direction of the price. On rising days the high range is used for the calculation. On falling days, the low range is used. This method tends to highlight bullish or bearish sentiment. See ClosedHow is the High/Low Range Constructed? for more details. Please note that this is the method used to build Point & Figure charts in prior versions of TradeStation.

 

 

The rules below summarize the way in which High/Low based Point & Figure charts are built:

 

When the current column is a column of X's (an up column)

 

1. First, consider the High of the underlying  bar (the data used to build the Point & Figure chart).

 

2. If the High of the underlying bar is higher than the High of the column of X's, by at least the Box Size, you would add one or more X's, as appropriate, to the top of the current column of X's.  The rest of the underlying bar would be ignored.

 

3. However, if the High of the underlying bar is not high enough for an X to be added to the column, you need to check for a reversal by checking the Low of the underlying data.  

 

4. If the Low of the underlying bar is less than the high of the column minus the reversal amount (Box Size x Reversal), you would shift to the right and start a new column with the required number of O's.

 

5. If the High of the underlying bar is not high enough to generate a new X, and the Low of the underlying bar is not low enough to merit a reversal, then the column of X's will remain unchanged and the underlying bar will be disregarded.

 

When the current column is a column of O's (a down column)

 

1. First, consider the Low of the underlying  bar (the data used to build the Point & Figure chart).

 

2. If the Low of the underlying bar is lower than the Low of the column of O's, by at least the Box Size, you would add one or more O's, as appropriate, to the bottom of the current column of O's.  The rest of the underlying bar would be ignored.

 

3. However, if the Low of the underlying bar is not low enough for an O to be added to the column, you need to check for a reversal by checking the High of the underlying data.  

 

4. If the High of the underlying bar is greater than the Low of the column plus the reversal amount (Box Size x Reversal), you would shift to the right and start a new column with the required number of X's.

 

5. If the Low of the underlying bar is not low enough to generate a new O, and the High of the underlying bar is not high enough to merit a reversal, then the column of O's will remain unchanged and the underlying bar will be disregarded.

 

This logic assures that the trend always takes precedence.

 

Point & Figure chart using a monthly interval based on High/Low range:

Close Basis

This construction method uses takes the latest price as it is received and compares it to the last X or O plotted. If the Close confirms the current direction, the current direction continues. If the Close retraces the current direction by the Reversal amount or greater, a new column is created in the reverse direction. Thus, it uses the last price it receives either to continue with the current column or to create a new column if the price reverses by the prescribed amount. See ClosedHow is the Close Constructed? for more details.

 

 

The rules below summarize the way in which Close based Point & Figure charts are built:

 

When the current column is a column of X's (an up column)

 

1. If the Close of the underlying bar is higher than the High of the column of X's, by at least the Box Size, you would add one or more X's, as appropriate, to the top of the current column of X's.  

 

2. If the Close of the underlying bar is less than the high of the column of X's, minus the reversal amount (Box Size x Reversal), you would shift to the right and start a new column with the required number of O's.

 

3. However, if the Close of the underlying bar is not high enough to generate a new X, and not low enough to merit a reversal, then the column of X's will remain unchanged and the underlying bar will be disregarded.

 

When the current column is a column of O's (a down column)

 

1. If the Close of the underlying bar is lower than the Low of the column of O's, by at least the Box Size, you would add one or more O's, as appropriate, to the bottom of the current column of O's.  

 

2. If the Close of the underlying bar is greater than the Low of the column of X's, plus the reversal amount (Box Size x Reversal), you would shift to the right and start a new column with the required number of X's.

 

3. However, if the Close of the underlying bar is not low enough to generate a new O, and not high enough to merit a reversal, then the column of O's will remain unchanged and the underlying bar will be disregarded.

 

This logic puts a greater emphasis on the reversal.

 

Point & Figure chart using a weekly interval based on a Close range:

Point & Figure Interval Settings

When creating a Point & Figure chart, you must specify the following settings:

For example, during an up-trend (column of X's), if the prices were to retrace, creating a single O in the next column, and then resume its prior (opposite) direction, an X and an O will be displayed in the same column, as shown in the example below:

Point & Figure Chart Display

Additional Information

For a comprehensive list of command line commands, see Command Line References (All Commands) or Command Line Reference (Sorted by Application).

Related Topics

About the Chart Analysis Window

Point & Figure Chart Formations Library

Creating a Point & Figure Chart

Formatting a Point & Figure Chart

Using Trendlines with a Point & Figure Chart

View Price Values