Point & Figure Charting

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Point & Figure Charting reduces the importance of time on a chart and instead focuses on price movements. Point & Figure charts are made up of X's and O's, X's being new highs and O's being new lows.

There are two inputs to a Point & Figure chart:

  1. Box Size: The size of movement required to add an “X” or an “O”. For example, a stock at a price of $20 may have a box size of $1. This means that an increase from $20.01 to a high of $21.34 means another “X” is added. If the high price only increased to $20.99, then another “X” is not added because the stock didn't close another box size ($1) more.
  2. Reversal Amount: The size of reversal before another column is added to a Point & Figure chart. To illustrate, if the reversal amount is $3, then the $20 stock would have to fall down to $17 before a new column (in this example of O's) would be started.

One of the main uses for Point & Figure charts, and the one emphasized in this section, is that Point & Figure charts make it easier for traders to see classic chart patterns. In the chart below of the E-mini S&P 500 Future, the Point & Figure chart emphasized support and resistance lines as well as areas of price breakouts:

 
point and figure charting

 

Again, the Point & Figure chart makes it easy for traders to see the double bottom pattern below in the chart of the E-mini S&P 500 Futures contract:

point and figure chart outlining a double bottom formation

The e-mini chart above illustrates the two bottoms of the double bottom pattern, as well as the confirmation line that is pierced, resulting in a potential buying opportunity.

Point & Figure is a very unique way to plot market action. The strongsuit of Point & Figure charting is that it eliminates the element of time and focuses on price.

How to Start Trading

If you are interested in trading stocks & commodities using technical analysis, have a look at our reviews of these regulated brokers available in to learn which charting & analysis tools they offer:

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 73.0%-89.0% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Further Reading

Learn more about technical analysis indicators, concepts, and strategies including Triple Exponential Average, the Head and Shoulders PatternGann's TheoryMoving Averages, and many others.

Also see our guides on Forex, Bitcoin, CFD, and Option brokers to find out which tools brokerages offer their clients.

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