Point-and-Figure (P&F) Chart

Overview

A Point-and-Figure (P&F) chart plots price movements without regard to time. Instead of plotting price at fixed time intervals (as with candlesticks or bars), P&F charts use columns of X’s and O’s to represent price moves of a predetermined size. X’s show rising prices; O’s show falling prices. Because small, irrelevant price fluctuations are filtered out, P&F charts can make support, resistance and true breakouts easier to spot.

How P&F Charts Work

• Box size: The amount of price movement required to add an X or an O. It can be:
• A fixed dollar amount (e.g., $1)
• A percentage (e.g., 3%)
• Volatility-based (e.g., a multiple of ATR)
• Reversal amount: The price movement in the opposite direction required to start a new column of the opposite symbol. Commonly set to 3× box size, but it’s adjustable.

Rules:
– When price rises by the box size, add an X to the current X column.
– When price falls by the box size, add an O to the current O column.
– If price reverses by at least the reversal amount, start a new column of the opposite symbol and plot enough symbols to reflect the full reversal.

Optional choice:
– Use highs and lows (more symbols and sensitivity) or closing prices only (fewer symbols, smoother).

Example: With a $3 box size, an X at $15 will add another X only if price reaches $18. If the reversal is 3 boxes ($9), a move below $9 beneath the top of the X column would begin a new column of three O’s.

What P&F Charts Tell You

• Trends: Long columns of X’s or O’s indicate strong trends; a column change may signal trend reversal or a significant pullback.
• Support and resistance: Levels often appear clearly because minor price noise is filtered.
• Breakouts: A new column or an extension beyond resistance/support can confirm a breakout; the box/reversal settings determine sensitivity and the timing of the signal.
• Filters false signals: By requiring a minimum move to change the chart, P&F can reduce whipsaws—but not eliminate false breakouts.

Practical Use

• Choose box size and reversal based on trading time frame, instrument volatility, and personal preference.
• Combine P&F signals with other tools (moving averages, momentum indicators, candlestick/OHLC charts) to confirm entries and manage risk.
• Monitor the actual price (e.g., on a candlestick chart) in real time—P&F is discrete and can lag since it only registers moves that meet box/reversal thresholds.

Comparison with Renko Charts

• Both use fixed price increments (boxes) to filter noise.
• P&F: columns of X’s and O’s aligned vertically, no implied time axis, reversal typically 3 boxes or adjustable.
• Renko: bricks plotted diagonally (45°), bricks never sit side-by-side, reversal commonly 2 boxes.
• Visual difference: P&F emphasizes columns and patterns; Renko emphasizes smoothed price path.

Limitations and Risk Management

• Latency: Signals occur only after price moves by the box or reversal amount; entries can arrive after a substantial move.
• Missed early signals: Strong reversals can erase profits quickly because reversals typically require several boxes of movement.
• False breakouts remain possible.
• Recommendation: Use P&F as part of a broader strategy—confirm with time-based charts and apply strict risk controls (stops, position sizing).

Brief history

Point-and-figure techniques date back to early charting methods used to evaluate supply and demand imbalances. Modern practitioners have adapted P&F to integrate with contemporary technical indicators.

Key takeaways

• P&F charts plot price movement, not time, using X’s for rising prices and O’s for falling prices.
• Box size and reversal amount are the two essential settings; common reversal is 3× box size.
• P&F filters noise and highlights support, resistance, and trends but can lag and still produce false signals.
• Best used alongside other charts and indicators for confirmation and risk management.