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Trading with Point & Figure Charts

PnF University
Dorseywright.com
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History of Point and Figure Technical Analysis.
A brief history of Point and Figure Charting along with some statistics on sector timing versus market
timing.


The premise of Point & Figure charting is to provide a logical, organized and sensible way of recording
the supply and demand relationship in any particular security or sector. When it is all said and done, if
there are more buyers in a particular security than there are sellers willing to sell, the price will rise. On
the other hand, if there are more sellers in a particular security than there are buyers willing to buy, then
the price will decline. If buying and selling are equal, the price will remain the same. This is the irrefutable
law of supply and demand. The same reasons that cause price fluctuations in produce such as potatoes,
corn and asparagus cause price fluctuations in securities. - taken from the book "Point and Figure
Charting" by Tom Dorsey.


The chart above depicts the first style of Point & Figure charts. Over the years, they have evolved. Today,
the price is located on the vertical axis and the "figures" are replaced with X's and O's. X's represent
demand and are always moving up the chart while O's represent supply and are always moving down the
chart.
This methodology was prominent in the 1960's but then dropped out of favor. This form of technical
analysis is unique and to become a craftsman requires study. By attending this on-line University you are
well on your way to becoming a craftsman. You will learn more about this in Lesson 1.


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Welcome:
Lesson 1: Introduction
Here we go!
This chapter is designed to familiarize you with Point and Figure
Charts, we call these "attributes" in this University. For those that are
familiar with PnF and have used it in their investment research, you will
know most of these terms and concepts. However, it is good for a
review as terms used in this chapter will be repeated throughout the
University. This chapter does include vital information for basic charting
and it shouldn't be skipped over as it is a foundation for the following
chapters. Chapter 1 is the base and each chapter following is a vital
component in understanding the big picture, how to put it all together.
One cannot understand the whole without knowing the parts.
In this section we will list any
upcoming live online classes
specifically covering this chapter.


Lesson 1 Contents:
Part 1: Attributes of a Chart

Part 2: Chart Basics
Attributes
Box Scales
Dates and date lines
Trading bands
Numbers and letters for the months

Three box reversal
Box scale tables
Flow chart of investing
Examples of how to chart
Support Lines
Part 3: Support Lines

Bullish Support Line
Bullish Resistance Line
Bearish Resistance Line
Bearish Support Line

Test yourself at the end of the chapter to sharpen your skills.
If you have any questions, please check the "Questions" section to see if it has already been answered. If
it has not, then click on the question mark icon below to email us your question. It will be answered
shortly (within two business days).
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Welcome:
Lesson 1: Part 1. Attributes of a Chart

Here is a Point and Figure Trend Chart with the characteristics pointed out and described. We will go into
detail as we continue through the first lesson.
A Point and Figure Trend Chart:
The trend chart depicts the price action of the stock. We call it the trend chart because of the support and
resistance lines that determine whether a chart is above or below trend. If someone say's "...the trend
chart" you know they mean this type of chart, this is different from an RS chart for example.
Key Points:
* X's mean the chart is rising
* O's mean the chart is declining.
* Never will you see X's in a column of O's or vice versa.
* Each column must have at least three X's or three O's.

You will notice some
columns have
numbers or letters in
place of an X or an
O. (In blue). These
depict months:
1 = January
2 = February
3 = March
This continues until
October in which...
A = October
B = November
C = December
This is because two
digit numbers
wouldn't fit in the
box.

Value / Price
column
The vertical axis is the price scale. From this you can determine the value
of each row.
Trading Bands:
These are hyphenated as "Bot" for the bottom of the trading band, "Med"
for the medium of the trading band and "Top" for the top of the trading
band. Applications of the the Trading Bands will be discussed in later
chapters.
Trend Lines:
The Bullish Support Lines and Bearish Resistance Lines help us
determine the trend of the stock.

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Welcome:
Lesson 1: Part 2. Chart Basics:

Details of the individual chart characteristics.
Value/ Price Column
The scale for a point and figure chart is on the left hand side or the
vertical axis. By looking at the price increments of the scale we can
determine the box size at that level.
Box sizes:
Changes are
determined by the price
range of the stock or
index. Here is a guide
to those changes.
Price of Stock Box Size



0.00 - 5.00 0.25
5.00 - 20.00 0.50
21.00 - 100.00 1.00
+ 102.00 2.00

Examples:
What the price columns
would look like in the
various box sizes:
0.25 box 0.50 box 1.0 box 2.0 box

5.00
4.75
4.50
4.25
4.00
3.75
3.50
9.00
8.50
8.00
7.50
7.00
6.50
6.00
40.00
39.00
38.00
37.00
36.00
35.00
34.00
120.00
118.00
116.00
114.00
112.00
110.00
108.00

Notice how the increments work,
how the value changes and is
determined by the box size.

Crossing Box Sizes:
There are times when a
stock will cross several
box sizes. Here is an
example of what that
price column would
look like:
0.25 to 0.50 box 0.50 to 1.00 box 1.0 to 2.0 box

6.00 22.00 104.00
5.50 21.00 102.00
5.00
change here
20.00
change here
100.00
change here
4.75
4.50
4.25
4.00
19.50
19.00
18.50
18.00
99.00
98.00
97.00
96.00