| The POINT & FIGURE charts differ from typical price
charts in that they are not concerned with time, but rather only with changes in
prices. Instead of having the price on one axis and the time frame on the other
axis, P&F charts have the price shown on both axis. When creating a P&F chart, you place an "X" when prices rise a "box size", and you place an "O" when prices fall by the box size. No other price movement less than the box size is plotted. Each column can contain either Xs or Os, but never both. To make a move from one column to the next, prices must reverse by the "reversal amount" multiplied by the box size. For example, if the box size is 2 points and the reversal amount is 2 boxes, then prices must reverse direction 4 points before you may change columns. If you are in a column of Xs, the price must drop 4 points in order to change to a column of Os. If you are in a column of Os, the price must go up 4 points in order to change to a column of Xs. A change in the price trend is indicated when the change to a new column occurs. |