Definitions for "Point & Figure Charts"
Technical analysis graphs that focus solely on price without any consideration of time.
The Point and Figure (PF) charting method is a technique that has been used for many years in analyzing the variations in prices of stocks and commodities. The principal advantage of a PF chart is that it is much easier to read and interpret than other types of charts. Two basic symbols are used: X Denotes the continuance of an increase in price and is always "stacked" in the vertical direction. O Denotes the continuance of a decrease in price and is always "stacked" in the vertical direction. While prices are rising X's are used. When falling, O's are used. They are always plotted on rectangular grid graph paper such that columns of X's and O's alternate. A Point and Figure chart is characterized by the specification of two parameters: box size and reversal number. The box size dictates the price range associated with a particular box (cubical area within the grid), while the reversal number specifies the conditions which terminate a column of X's and begin a column of O's and vice-versa.
A point & figure chart is a study of pure price movement, i.e. it does not take time into consideration. When plotting a P&F chart you are asked for a box size, which is the number of points each X or O represents, then you are asked for the number of box reversals, which is the amount of price reversal required to register on the chart. The chart is plotted by changing the price action into the X & O columns depending on the movements in the price. A volatile market will result in a wide chart, whereas a quiet market will result in a narrow chart.