Ignoring Time: Point-and-Figure Charting
In This Chapter
Figuring out point-and-figure charting
Looking at patterns
Taking a look at breakouts
Using point-and-figure with other indicators
Point-and-figure (“P&F”) charting strips away time and displays only significant prices on the chart. Significant prices are those that exceed the high or low of a recent trading range by a specified amount. You ignore minor moves — literally. You don’t even record them on your chart. The result is filtered price action. You don’t see a price move in the opposite direction of the current trend until it’s meaningful, according to a rule you set yourself, so that you can have confidence when a reversal signal is accurate.
You can also easily identify patterns on point-and-figure charts, especially support and resistance, and therefore, breakouts of support and resistance. Point-and-figure charts look very different from standard bar charts, but after you get used to them, you may find their directness and simplicity addictive.
P&F analysis is suitable for trading that has a medium- to long-term holding period — weeks and months. The ...