What Are Point and Figure (P&F) Charts?

Point and figure (P&F) charts are designed for long-term investment. They've been described as one of the simplest systems for determining solid entry and 澳洲幸运5官方开奖结果体彩网:exit points in stock market trading. This charting system monitors the supply and demand of each issue while💦 keeping an eye on developing trends. What makes P&F charts unique is that they don't account for the disc✅rete passage of time as most other types of charts do along their x-axis.

Point and figure charting has never been at the top of the list of the most popular techniques used by 澳洲幸运5官方开奖结果体彩网:technical analysts but there's a growing interest in P&F from all corners of the charting ᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚcommunity.

Constructing P&F Charts

The conventional technical analysis chart tends to be an open-close/high-low chart that plots price movements over time such as from day to day. The emphasis is only on the 澳洲幸运5官方开奖结果体彩网:closing price of an issue in the creation of a P&F chart. The developers of P&F charting were interested in trend development. They weren't concerned with the noise created daily by minor moves up or down. Their focus was on how the larger picture played out from a 澳洲幸运5官方开奖结果体彩网:supply and demand perspective.

The key to P&F charts is the establishment of the unit of price, which is the unit measurement of a price movement plotted on the graph. There's no time axis on P&F charts, only a price axis. Rising stock prices are shown with Xs and falling prices are shown with Os.

It would appear as a column of three Xs if the closing prices of a stock moved up one price unit three times. The chart shows a new column of Os if the price movement reverses direction. An O is plotted for each unit of movement. Xs and Os never appear in the same column. The chartist must establish how many price units make up a box and this is how much the price must move in the opposite direction for the chart to begin a new column.

Example of a P&F Chart

Let's say a stock you were tracking was trading at $25. You were using a $1 unit measurement and a reversal box is three units. The stock would have to close at $22 before the chart would reverse to a column of Os if it had been trading upward 🐼to $25. Each unit of price movement down from the $25 level must be represented by one O in this new column o🌱f Os.

The next reversal would have the stock trading up at least $3 or three points before a new column of Xs came back into view on our P&F chart. Assume the issue continues to fall to $20 before reversing itself. The Xs🌠 would reappear when the price hits $23.

Remember, you choose the unit size. It could be $0.50, $1, or even $2 if the stock price is 𓆉high enough. Graphically, the first two columns of our example would look like this:

Reading P&F Charts

It's clearly understood by P&F experts that the 澳洲幸运5官方开奖结果体彩网:law of supply and demand determines the price of a stock. They believe that demand has overcome supply if the issue is rising in price and they have an uptrend in place with at least three Xs.

The reverse indicates that supply has overcome demand when the chart gives three Os. P&F charts show the establishment of trends, trend reversals, and the supply and demand of charted issues.

Here are some examples:

This chart gives you a solid base to further study two important principles of P&F charting: support levels and 澳洲幸运5官方开奖结果体彩网:resistance levels. Both 澳洲幸运5官方开奖结果体彩网:support and resistance are shown in 澳洲幸运5官方开奖结果体彩网:horizontal lines and 澳洲幸运5官方开奖结果体彩网:trendlines that are represented with 45-degree angles.

Support Levels

A support level is a level at which investors and traders believe that prices will start to move higher after hitting the support mark. Look at the three Os in the example above. A horizontal row of Os is what you're looking for when you're zeroing in on a trend reversal and an uptrend to begin.

Resistance Levels

A horizontal row of Xs marks the resistance levels you want to look for in the P&F charting study. Studies of trendlines have shown that breakthrough resistance levels generally occur with great gusto, big volume, and a rapidly increasing stock price.

The Bottom Line

Trends take a long time to reverse so traders should keep in mind that P&F charting is designed for long-term investors. It has no value for the short-term trader. Technical investors can take positions that have a strong probability of profiting by using point a🔜nd figure charting to identify overall price trends.

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