Point and Figure Chart Analysis: Technical
Indicators
All the charts discussed so far have been an arithmetic Point
and
Figure chart, where the box size is the same throughout the
chart. However it is possible to draw log scale charts where
the value of the box increases as the price rises
ensuring constant sensitivity throughout the chart.
Log scaling is achieved by setting the box size to a percentage instead
of a number of points. This ensures the percentage change
from one box to another remains constant, but the box value at each
price varies.
A log scale Point and Figure graph is ideal for
longer-term analysis.
Many users of Point and Figure are unaware that it is
possible to draw
moving averages, Bollinger bands and technical
indicators
on a Point and Figure
chart, because it is assumed that all these require the input of a
time period. But, P&F charts advance as columns change
from X to O, so moving averages and Bollinger bands can be calculated
on the number of columns rather than on the number of time periods.
The Point and Figure graph advances as columns change from X to O, so
moving averages and Bollinger bands can be calculated on the number of
columns rather than on the number of time periods.
Figure
8 Euro 0.0075 x 3 Point and Figure chart with 10 column
Bollinger bands
Figure 8 shows a 0.0075 (75 pip) x 3 Point and Figure of the Euro with
a 10 column moving average and Bollinger bands 2 standard deviations
away from it. This has opened up a whole new area of Point
and Figure analysis, where
traditional time series chart tools are being used in the same way on
P&F charts.
Point and Figure graphs are essential tools for any technical
analyst. Anyone serious about using technical
analysis for
trading and investing should ensure that they are
familiar
with Point
and Figure charts and their analysis.
Jeremy
du Plessis
Jeremy du
Plessis CMT FSTA is head of Technical Analysis at Updata Ltd
based in London. He is a member of the Market Technicians
Association (MTA) and American Association of Professional Technical
Analysts (AAPTA) in the US, as well as a Fellow of the Society of
Technical Analysts (STA) in the UK. He is a regular speaker
on Point and Figure at international conferences and
seminars. He is the author of The Definitive Guide to Point
and Figure, first published by Harriman House in 2005 with a fully
revised second edition published in 2012.
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