What is Point and Figure charting? (What is a Point and Figure chart?)

Point and Figure Charts use the proven and reliable laws of Supply and Demand in economics. Supply and Demand have been around since the start of time. The stock chart shows if Supply or Demand is in control of the stock.

What do the X’s and O’s represent?

The X’s Represent the Demand (buying) and the O’s represent the Supply (selling).

How do you create a Point and Figure chart?

The chart is created by alternating columns of X’s and O’s. Strictly X’s or O’s are allowed in one specific column (a single column can’t have both.) To change columns (a column of X’s to a column of O’s or vise versa) it must reverse direction 3 boxes. The changing of columns back and forth creates the chart.

How are the X’s and O’s plotted onto the chart?

The potting of X’s or O’s on the chart is based on the stock’s daily highs and lows. First check the current column the chart is in, if X’s look at the daily high, did it rise? If yes, check if it rose enough to mark another X or multiple X’s in the current column. If it did not rise at all or enough to chart at least one X then check the low. Is the low point at least 3 boxes down from the current X column top? If so, plot the O’s into a new column, this is a reversal and Supply now has control. Continue through the same process but if Supply is in control, now the lows are looked at first and it takes a 3 box reversal to go to an new column of X’s.

The point and figure chart ignores volatility and leaves you with a clear picture of the competition between Supply and Demand. When Demand is in control (column of X’s) the price of the stock goes up, and if Supply is in control (column of O’s) the price of the stock goes down.

How do you use a Point and Figure chart?

Both investors and traders use them to see buy and sell signals as well as long term trends. The chart patterns generated by the X's and O's clearly show where buy and sell signals are, unlike other technical stock chart patterns that can be hard to identify. The overall trend of a chart is also easy to determine on P & F charts because they filter out all the noise of stock price movement and the true supply and demand picture of the stock is displayed. When plotted it is easy to see the long term trend of the stock, is the chart going up or down as you go from right to left?

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Point and Figure Charting

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