Darren Winters

What do P&F charts look like?

A point and figure chart is always plotted as a series of columns, ideally on squared or graph paper. Each column contains either letter Xs , representing rising prices, or letter Os representing falling ones (never both!) The vertical axis of the chart represents share price, the horizontal one, time – but not in a linear sense! A new column is only added to the chart when the share price substantially changes direction, so one column on the chart can represent a single day, several days, or even several weeks!

The Advantages of Point and Figure Charts

Point and figure charts have several advantages over simple line graphs showing the movement of prices. Primarily they remove the effect of noise, concentrating on the high and low prices of each share during each day. They can also compress several days into one, depending on whether share movement is fast or sluggish, thereby compressing the horizontal axis (time) unevenly. Surprisingly, there are situations where this can prove useful. However, their greatest advantage is that they make spotting support levels, resistance levels and upward and downward trends very easy to spot.

What are Point and Figure Charts?

Point and Figure charts are a way of plotting the movement of share prices in such a way as to remove the effect of the noisy variations and just leave the important information. They were developed in the years before computers made chart plotting and interpreting easier as a quick method of tracking the stock market. Although their popularity declined when computers became common, there has recently been a renewal of interest in them.