Automating Point-and-Figure Trend Reversals with Fixed Price Boxes

Summary

The document explains an automated point-and-figure trading method that assigns each closing price to a fixed-width price box. It tracks the highest box reached during an uptrend and the lowest during a downtrend. A reversal threshold, expressed as a number of boxes moving against the current trend, switches the system between long and short signals. It also describes a platform-specific adjustment: matching the platform’s built-in charts requires setting the reversal threshold one box higher than the chart setting.

The example uses a box size of 20 points, a reversal setting of 4, one contract, and a 350-point profit-loss stop. The author says results depend heavily on box size, that no single box size is optimal, and that outcomes may depend on chance. The document offers no backtest results or evidence that the example is profitable. It also notes that the trading signals use closing prices, so readers should verify how the implementation handles prices that move across multiple boxes and how the stop behaves in their own trading environment.

Key ideas

• Closing prices are mapped to fixed-width boxes to form point-and-figure trends.
• The system switches direction after price moves a configurable number of boxes against the current trend.
• Matching the platform’s built-in charts requires a reversal setting one box higher in this example.
• The example opens long or short positions when the tracked trend changes and uses a fixed profit-loss stop.
• The author says results depend heavily on box size and provides no backtest evidence or optimal setting.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.