An introduction to point and figure charting

This article will provide an introduction to the concept of point and figure charting, a system that involves designing charts for long-term business investment strategies as well as monitoring demand, supplies and trends. Despite not being a traditionally popular function for senior analysts, point and figure charting has seen a growing interest in recent years. This article will tell you more about point and figure charting.

Explanation

Stock price unit Point and figure charts aim to establish the unit measurement of a figure change that has been revealed on a graph, known as the unit of price. For example, a stock price that is increasing would be identified as ‘X’, while a falling price would be recognised as ‘O’. Therefore, if a graph has three ‘X’ symbols, it would mean that the stock price unit had risen by three times. All price units have to be plotted and the size of each unit will be determined by the analysts. Also, the chart must be able to establish the number of units within each box, which will show how much of a price change will be required in order for a new column to be created.

Understanding them

When a figure is increasing in price, there is a rising trend taking place. Therefore, when demand exceeds supply, three’ X’ symbols would be present. Alternately, if the issue is falling in price, then three O’s will demonstrate that the supply has exceeded the demand. Meanwhile, a graph will either show a support level or a resistance level.
Support level and resistance level A support level is where traders and investors expect prices to rise after they reach the support mark. A resistance level will point towards a dramatic increase in vole and a stock price that is increasing at a rapid rate. Since trends can be difficult to monitor and often take a significant amount of time to reverse, P&F charts can be a valuable tool for investors with a vested interest in long-term strategies. They have no value for the short-term investor, since they are resistant to major fluctuation or volatility. However, the real value of P&F charts is that they can help investors to choose issues that suggest a strong possibility of long-term profit by identifying the overall trends in the markets. Meanwhile, for a more thorough explanation, consider reading Thomas Dorsey's book 'Point and Figure Charting',