Little More About Point-and-Figure
The Point-and-Figure (P&F) chart isn’t the same as other chart sorts in that extent and time are unimportant and, not charted. Only the charge topics, and best if it’s miles an extensive amount.
It records price increases as columns of X’s and reduces by using columns of O’s on a graph with fee increments displayed alongside the vertical axis.
Time commonly displayed at the horizontal axis, but no longer in a proportional amount, however as an alternative discontinuously, because a single column of X’s or O’s could span days, weeks, or even months.
It refers the amount via which a fee ought to range from the ultimate rate earlier than we record it to as the field size. A box likewise frequently referred to as a factor, consequently the name of the chart.
The Price Behavior in Point-and-Figure Charts
It records all costs as multiples of the container size; it drop any fractional thing. So if the field size is $1, and a stock rises by extra than $1 to $15.
Ninety nine, then the price it marks the price as an X at the $15 degree; it isn’t always rounding up to $sixteen.
Box length decided by using both stock charge and volatility—the greater either is, the bigger the container size. Typically, container sizes vary from $0.50 for reasonably priced shares too many greenbacks for greater luxurious shares.
The box size may even exchange in the same graph if expenses span a huge C language. However, the trader can pick out the field size that pleasant suits his desires.
Any rate modifications which might be much less than the container length aren’t record.
If the excessive charge increases with the aid of as a minimum the box length, and the innovative column is an X column, then an X recorded above the top X for every rate increment identical to the container size.
So if the box size is $1, and a stock has it delivers a high to the pinnacle of the column.
Note that the ultimate recorded charge might not have been for the final buying and selling consultation—it may have been several weeks before if there was no price increases more than the box size inside the meantime.
If the low of the day is more than the box length, then it’s miles brought to the bottom of the O’s if the contemporary column comprises O’s — the inventory is in a downtrend.
X-Column In Point-and-Figure
However, if the modern column is an X-column, then a brand new column will start out to file the O, but simplest if the fee lower is extra than the reversal quantity.
The 1st P&F charts used a reversal quantity identical to 1 box length. We know these as 1-box reversal charts to distinguish them from the more recent and easier three-box reversal charts (AKA 3-point reversal charts), where the reversal amount become identical to 3 field sizes.
So a fee exchange inside the contrary route this is extra than the container size but less than the reversal quantity could now not recorded.
While Point-and-Figure charts have much less information than other chart types, this changed into taken into consideration an advantage, since it allowed the trader to focus on charge movement, which is taking into consideration the most essential parameter through buyers using technical evaluation.
By removing much of the noise of everyday price fluctuations, styles have been simpler to identify and to interpret.