Point and Figure Chart
A point and figure chart is used for technical analysis of securities.
Point & Figure charts consist of columns of X's and O’s-- described by symbol O for supply and X for demand—that represent longer-term
price movements. They are used to trade by identifying the key points of supply and demand relationship.
Point and Figure History
As a method of stock technical analysis, point and figure charts have been around for a long time. Point and Figure technical
analysis actually dates its use back to the 1800’s before computer was invented. However, it has not been so widely used as recently as investors start to
look for better ways to select stocks—it has grown in popularity for its simple, logical, and straightforward way to record price movement.
Advantages of using Point and Figure Charts
The purpose of point & figure analysis is to produce charts that are logical, clear and simple to read. Unlike most other traditional
investment charts, point and figure charts are not based on fixed time, and it only shows trends in price movements. The aim of point and figure charting is
to focus on the main direction of the price trend. With the clearly defined buy signals and sell signals, points and figure charts can help traders
determining entry and exit points in stock market trading.
There are several advantages to using point and figure charts instead of the more traditional bar or candlestick charts.
- Easy to understand and simple to use
- Help you stay focused on the important long-term price movements,
- Remove the often misleading effects of time from the analysis process,
- Make it easy and clear to identify the important trend lines,
- Easy to recognize and interpret patterns and buy/sell signals
