Point and Figure Charting: A Timeless Technique for Market Analysis
Point and figure charting is a method of technical analysis that has been used for over a century by traders and investors. It is based on plotting price movements on a grid of Xs and Os, where each column represents either rising or falling prices. Unlike other forms of charting, point and figure charting does not use time as a factor, but only focuses on price changes that meet a certain threshold. This way, point and figure charting filters out the noise and reveals the underlying trends and patterns of the market.
One of the leading experts on point and figure charting is Thomas J. Dorsey, who has written several books on the topic, including Point and Figure Charting: The Essential Application for Forecasting and Tracking Market Prices[^1^]. In this book, Dorsey explains the history, principles, and applications of point and figure charting, covering topics such as chart patterns, relative strength analysis, market indicators, sector rotation, fixed-income, exchange-traded funds, commodities, options, portfolio construction, and management. He also provides examples and case studies from various markets and time frames to illustrate how point and figure charting can help traders and investors make better decisions.
Point and Figure Charting: The Essential Application for Forecasting and Tracking Market Prices is a comprehensive and practical guide for anyone who wants to learn more about this timeless technique of market analysis. It is available in both print and online formats[^1^]. Whether you are a beginner or an experienced practitioner of point and figure charting, you will find valuable insights and tips from Dorsey's book.
One of the main advantages of point and figure charting is that it filters out insignificant price action and market noise[^2^]. By using a box size and a reversal amount, point and figure charting only plots the price movements that exceed a certain threshold. This helps to eliminate the minor fluctuations that may distract or confuse traders and analysts. Instead, point and figure charting focuses on the major trends and shifts in supply and demand that drive the market.
Another benefit of point and figure charting is that it provides a clear visualization of support and resistance levels, trend lines, breakouts, and reversals[^2^] [^3^]. Support and resistance levels are horizontal lines that indicate where buyers and sellers tend to enter or exit the market. Trend lines are diagonal lines that connect successive highs or lows of a price movement. Breakouts are when the price moves beyond a support or resistance level or a trend line. Reversals are when the price changes direction after a significant move. Point and figure charting makes it easy to identify these important features by using X's and O's to mark the changes in price direction.
A final benefit of point and figure charting is that it is a timeless tool for price movement analysis[^2^] [^4^]. Unlike other forms of charting that depend on time intervals, point and figure charting does not require any time scale. This means that it can be applied to any market, any time frame, and any data source. It also means that it can be used to compare different markets or assets on the same chart, regardless of their trading hours or frequency. Point and figure charting is a versatile and adaptable technique that can suit any trader's or analyst's needs. aa16f39245