Lessons from the Pros

One approach is to say that series of trendlines drawn as a bullish support or bearish resistance that gets violated successively.

Looking back I was hungry for action while I was on vacation and I had no business placing the trade as the market was in full holiday mode. 

As PnF charts remove noise, the market profile itself gets more cleaner and sensitive to price changes. They are very useful for spotting the short-term trend and identifying stocks that have just broken out of a consolidation pattern.

Our P&F system is a complete “toolbox” for technical traders and investors. 

Stocks & Commodities V. (): Working Money: Testing Point & Figure Patterns by Michael J. Carr to employ them as one component of a trading strategy, for.

The first method on the left was simply recording prices up and down without fractions which, you can imagine would become mind-numbing overtime. Therefore, you will not see a new candle print because there is a new day or time period like you do with candlestick charts.

If price has not reversed or broken out from your predetermined levels discussed below, then there will be no change to the chart. This name type comes from Box size X Reversal. The reversal size will determine how sensitive your charts are. The most common choices are 1-box reversals and 3-box reversals. A 3-box reversal chart will require 3x the amount of price action against the prior trend before reversing than a 1-box reversal.

You can easily see the recent price action calculated presented differently through these different manners. See single level ORB below. Note that the single level open range breakout, really just the market opening mean projects that the market will be bearish below the mean level and bullish above the mean level.

Use double top and triple top entries for going long above and likewise shorting below the ORB levels. Do not enter trades which are more than 10 points away from the Camarilla levels. Use initial stop loss levels and a trailing stop that is kept at an appropriate distance from the high in a long trade and from a low in a short trade.

Do not use the 45 degree line as a stop loss level. You may use the 45 degree line as an exit level and for re-entry, should a trade continue after a seeming reversal.

And then the 2 level ORB charts. In 2 level range breakout, there is a true range where the noisy, sideways movements can be avoided between the highs and lows of the first minutes of the market opening. The range can also be looked as a market mean band. Observe how clean the PnF charts are. Click the PnF chart for a bigger and clearer view. Rules for trading Camarilla levels on PnF charts: Use double top and triple top entries for going long above S1,R1 and R2 levels and likewise shorting below R1,S1 and S2 levels.

Notice how the noisy trades at the level are avoided in the PnF charts. Again PnF charts score if you ignore the trades at the level which are not shown in the conventional charts above as well. The principles here apply to 2 box reversals and higher charts.

Pros of resistance based trading. But can be prone to noise in ranging periods. Moving averages catch trends very well, but are slow to react in ranging periods when you may get stopped out on valid signals, even while you avoid noise.

An interesting way to trade.. In long trends, you may miss a greater part of the trend when intermediate reversals occur. To take an example the 45 degree line by definition implies price is in a strong uptrend while its above the trend line and in a down trend while its below. In a larger trend indicated by a major 45 degree trend line, if there is a down trend, caused by an intermediate correction, this can be taken advantage of by drawing counter trend lines in the opposite direction, but with a clear understanding that being a counter-trend, price could reverse at any time, and you could reverse trade immediately, should that happen, if the counter trendline is broken.

Explore this concept a little more, and you will never trade with indicators again! There is an attempt to reverse, but this fails to go anywhere near the counter trend line so the short remains active till we breach the major uptrend line, from where we look for a first reversal and consider entering a long with a double tip signal. This is the most important feature of this concept, where you can avoid false reversals. Develop your trading rules around this concept, and see a marked improvement in your trading efficiency.

This concept is unique and original. In the chart below, you will not find an intermediate reversal prior to that shown, as there is no double top sell after any such potential move. In such zones, the trading range is limited and neither buyers or sellers can make any money because of the lack of movement. How would you identify such zones. Expert traders would look at a chart and recognize by price patterns entering a range.

Technical analysts might suggest that whipsawing of a fast and slow moving average is another way to look at the beginning of consolidation. PnF charts offer very simple and objective ways of identifying consolidation zones.

One approach is to say that series of trendlines drawn as a bullish support or bearish resistance that gets violated successively. A more cleaner way is to use the concept of bullish resistance and bearish support lines to project a channel of movement for the price and if price does not manage to cross more than 2 such lines either above or below the price action, then price is in a consolidation zone.

What are bullish resistance lines? These are lines drawn at 45 degrees from an X resting against a falling wall of O's with the next line of O's one step below. Likewise bearish support lines are drawn from edges of X's pushing up against a wall of O's. Best seen in the chart below.. The important point to note is that it does not need more than 2 such lines to encompass price in a consolidation zone.

Any more than that, will signify a trend as shown. Ignore trend lines inside any double top formation for this purpose. On the other hand, for trending prices, one needs to simply test whether a bullish support or a bearish resistance line remains intact in the price action zone. There drawing the bullish resistance and bearish support is an overkill as shown below.

As long as there is no reversal that breaks that low, we stay in the trade. The system would be similar for shorts. We would stay in our short position until we have breeched that previous high. If we happen to be long or short in a large move, we may not want to wait for a large reversal to exit. If we were to wait, we may give back too many profits.

So instead of waiting for the typical sell signal, stop yourself out when you have the first three box reversal. For the target price, we can use a horizontal box count.

When prices move, they usually originate from a basing area. We can project the width of this basing to offer probability targets for the trend when we are in. The target does not have a timeframe and can take time to reach. Remember, only price movement matters, not the passage of time. In this case, we would multiply the horizontal box count by the box size and the reversal size to determine the projection length. So these are the basics of point and figure charting.

Until then, trade safe and trade well.


Using a Traditional Tool 

Home. simpsons-online.tk is the definitive resource on Point and Figure online - we have P&F charts, Relative Strength and P&F Patterns.

An introduction to using Point & Figure charts for any trading strategy such as a breakout trade plan, a forward trend trade plan or even a counter trend trade plan. A student recently emailed me and asked if there was a way to use Point and Figure charting with Online Trading Academy’s core strategy. I decided to take this week's article to . 

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The Triple Top/Bottom

See exactly how I calculate point and figure price targets when swing trading volatile stocks. Point & Figure charting has a long history. One of the first references to Point & Figure charting came from an anonymous writer named Strategies; Point and.

The Triple Top/Bottom. Proponents of this technique believe that focusing solely on price changes eliminates day-to-day market noise. Traders believe that by ignoring smaller movements, it should. Point & Figure Stock Screener with an ability to backtest Point & Figure Stock Screening Strategy and setup trade alerts for Point & Figure signals. Backtest your Point & Figure trading strategy.

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