Point and Figure Charting - Brainy's Share Market Toolbox · Point & Figure Advantages Removes...
Transcript of Point and Figure Charting - Brainy's Share Market Toolbox · Point & Figure Advantages Removes...
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Point and Figure Point and Figure
ChartingCharting
Alan ClementAlan Clement
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About Alan ClementAbout Alan Clement
�� Been involved with financial markets for Been involved with financial markets for
over 20 yearsover 20 years
�� IFTA Certified Financial Technician IFTA Certified Financial Technician
�� Trading for a living for 7 yearsTrading for a living for 7 years
�� Use 100% Technical AnalysisUse 100% Technical Analysis
�� Mechanical TraderMechanical Trader
�� Design mechanical trading systemsDesign mechanical trading systems
�� Contribute to Contribute to The AgeThe Age Technical Analysis Technical Analysis
columncolumn
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What I UseWhat I Use
�� PricePrice
�� IntermarketIntermarket AnalysisAnalysis
�� Candlestick ChartsCandlestick Charts
�� Ichimoku Cloud ChartsIchimoku Cloud Charts
�� Point & Figure ChartsPoint & Figure Charts
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What is Point & Figure Charting?What is Point & Figure Charting?
�� A method of charting price, without A method of charting price, without
reference to time.reference to time.
�� One of the oldest price charting One of the oldest price charting
methods known.methods known.
�� A very efficient method of following A very efficient method of following
price action as it develops.price action as it develops.
�� An objective method of determining An objective method of determining
trends and price breakouts.trends and price breakouts.
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Why Use Point & Figure?Why Use Point & Figure?
�� Get clarity on the Get clarity on the ““Big PictureBig Picture””
�� Objectively gauge trends and Objectively gauge trends and consolidationconsolidation
�� Easily spot areas of potential support Easily spot areas of potential support and resistanceand resistance
�� Easily locate areas of congestionEasily locate areas of congestion
�� Calculate price targetsCalculate price targets
�� Derive trading signals and easily Derive trading signals and easily measure risk/reward ratiosmeasure risk/reward ratios
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Point & Figure AdvantagesPoint & Figure Advantages
�� Removes noise giving greater clarityRemoves noise giving greater clarity
�� Granularity can be easily controlledGranularity can be easily controlled
�� Provides an objective indication of Provides an objective indication of trendtrend
�� Strength of trend can be easily Strength of trend can be easily measured measured
�� Areas of future support / resistance Areas of future support / resistance can be objectively determinedcan be objectively determined
�� Uncannily accurate price targetsUncannily accurate price targets
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How Point & Figure DiffersHow Point & Figure Differs
�� Less detail on chartLess detail on chart
�� No gapsNo gaps
�� Traditional patterns less obviousTraditional patterns less obvious
�� No time dimensionNo time dimension
�� Arguably stronger trading signalsArguably stronger trading signals
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Chart ExampleChart Example
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Point & Figure ConstructionPoint & Figure Construction
�� Box Size? Box Size?
•• General rule of thumb is to use 1% of General rule of thumb is to use 1% of
the current price rounded to nearest 1, the current price rounded to nearest 1,
5, 10, 100 etc5, 10, 100 etc
�� Reversal Size?Reversal Size?
•• 3 box reversal is standard3 box reversal is standard
�� Price element?Price element?
•• Closing priceClosing price
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P&F ConstructionP&F Construction
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P&F ConstructionP&F Construction
12451245
13501350
13351335
13201320
13051305
12901290
12751275
12601260
13651365
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P&F ConstructionP&F Construction
XX
XX
OOXX
XXOOOOXX
XXOOXXOOXX
XXOOXXOOXX
XXOOXXXX
XX
12451245
13501350
13351335
13201320
13051305
12901290
12751275
12601260
13651365
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S&P500 Weekly 15 x 3S&P500 Weekly 15 x 3
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Adjusting GranularityAdjusting Granularity
�� Increase and decrease box size to see Increase and decrease box size to see
more granularity on the chartmore granularity on the chart
�� This is analogous to switching timeframes This is analogous to switching timeframes
on bar / candle chartson bar / candle charts
�� Smaller box size will introduce more Smaller box size will introduce more
““noisenoise”” in the price action. in the price action.
�� Larger box size will compress chart data.Larger box size will compress chart data.
�� Think of it like zooming in and zooming Think of it like zooming in and zooming
out.out.
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S&P500 15 box sizeS&P500 15 box size
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S&P500 10 box sizeS&P500 10 box size
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S&P500 5 box sizeS&P500 5 box size
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S&P500 15 box sizeS&P500 15 box size
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S&P500 25 x 3S&P500 25 x 3
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Patterns & SignalsPatterns & Signals
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Patterns & SignalsPatterns & Signals
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Patterns & SignalsPatterns & Signals
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Patterns & SignalsPatterns & Signals
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Bullish Shakeout or Bearish Bullish Shakeout or Bearish
Catapult setting up?Catapult setting up?
XX
XX
OOXX
XXOOOOXX
XXOOXXOOXX
XXOOXXOOXX
XXOOXXXX
XX
12451245
13501350
13351335
13201320
13051305
12901290
12751275
12601260
13651365
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Low Pole Low Pole High PoleHigh Pole
Buy
Sell
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LetLet’’s Find Some Patternss Find Some Patterns
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TrendsTrends
�� Trendlines always drawn at 45 Trendlines always drawn at 45
degrees to the square grid from degrees to the square grid from
significant high or lowsignificant high or low
�� Trend broken when a break of Trend broken when a break of
trendline occurs with a valid patterntrendline occurs with a valid pattern
�� As soon as a valid trend break As soon as a valid trend break
occurs, a trendline in the opposite occurs, a trendline in the opposite
direction can be drawndirection can be drawn
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TrendlinesTrendlines
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Support & ResistanceSupport & Resistance
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cf. Candlestickcf. Candlestick
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TargetsTargets
�� Vertical Targets are calculated from the Vertical Targets are calculated from the first major thrust off a significant high or first major thrust off a significant high or low.low.
�� Target = Number of Xs or Ox in first Target = Number of Xs or Ox in first thrust column thrust column timestimes box size box size timestimesreversal size reversal size addedadded to low or to low or subtractedsubtractedfrom high.from high.
�� Easy way: 3 times height of first column Easy way: 3 times height of first column from high / lowfrom high / low
�� Targets given must be activated with a Targets given must be activated with a pattern before validpattern before valid
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Target ExamplesTarget Examples
Short Target example:
High (1575) less [10 “O”s X box size (15) X reversal (3)]
(10 X 15 X 3) = 4501575 – 450 = 1110
Long Target example:
Low (690) plus [17 “X”s X box size (15) X reversal (3)]
(17 X 15 X 3) = 765
690 + 765 = 1455
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Some Target TipsSome Target Tips
�� Targets have no timescaleTargets have no timescale
�� Are previous targets in the same Are previous targets in the same
direction being achieved?direction being achieved?
�� Clustered counts enhance probabilityClustered counts enhance probability
�� Count negationCount negation
�� Opposing countsOpposing counts
�� Combine counts with trendlinesCombine counts with trendlines
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Target Tips Target Tips
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Using P&F for Entry SignalsUsing P&F for Entry Signals
�� DonDon’’t take every DTBO and DBBOt take every DTBO and DBBO
�� Look for congestion followed by Look for congestion followed by higher probability patternhigher probability pattern
�� Take signals in the direction of the Take signals in the direction of the trendtrend
�� Use column lows / highs to position Use column lows / highs to position your stopyour stop
�� Use targets to calculate risk / reward Use targets to calculate risk / reward ratioratio
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Entry SignalsEntry Signals
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ThatThat’’s enough theory, lets enough theory, let’’s s
analyse some charts!analyse some charts!
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Swiss Franc 1 x 3Swiss Franc 1 x 3
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Hang Hang SengSeng 250 x 3250 x 3
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Gold 15 x 3Gold 15 x 3
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Feed Cattle 1 x 3Feed Cattle 1 x 3
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Silver 50 x 3Silver 50 x 3
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US Dollar 0.5 X 3US Dollar 0.5 X 3
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Corn 5 x 3Corn 5 x 3
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Wheat 10 x 3Wheat 10 x 3
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Wheat 5 x 3Wheat 5 x 3
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AUD/USD 0.01 X 3AUD/USD 0.01 X 3
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AUD/USD 0.0075 X 3AUD/USD 0.0075 X 3
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AUD/USD 0.005 X 3AUD/USD 0.005 X 3
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Advanced Topics to InvestigateAdvanced Topics to Investigate
�� Different reversal sizesDifferent reversal sizes
�� Log Scale ChartsLog Scale Charts
�� Horizontal CountsHorizontal Counts
�� Use P&F as an IndicatorUse P&F as an Indicator
�� Use as Market Breadth indicationUse as Market Breadth indication
�� Moving AveragesMoving Averages
�� Parabolic SARParabolic SAR
�� Bollinger BandsBollinger Bands
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SummarySummary
�� P&F is a great addition to your trading P&F is a great addition to your trading armoury, to be used alongside your other armoury, to be used alongside your other techniquestechniques
�� Get the Big Picture and an objective view Get the Big Picture and an objective view of trend and targets of trend and targets
�� Start with a 1% box size and drill down Start with a 1% box size and drill down and up for more / less granularityand up for more / less granularity
�� Look for highest probability setups when Look for highest probability setups when trading off P&F chartstrading off P&F charts
�� Look for clustering targets in the direction Look for clustering targets in the direction of the trendof the trend
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Further StudyFurther Study
The Definitive Guide to Point and The Definitive Guide to Point and
FigureFigure –– Jeremy du Jeremy du PlessisPlessis
Kaplan Kaplan –– Short Course 9063: Short Course 9063:
Specialist Techniques in TASpecialist Techniques in TA
as part of the ATAA Diploma in TAas part of the ATAA Diploma in TA
See See www.ataa.com.auwww.ataa.com.au