Point and Figure Charts: Box Reversals and Breakout Patterns

Summary

The article explains Point and Figure chart construction, in which rising and falling price movements form columns of X and O symbols while elapsed time is omitted. A box size sets the price increment represented by each symbol, and a reversal amount sets how far price must move in the opposite direction before a new column begins. The article illustrates these rules with price data and describes using minute-bar openings to create a more detailed chart.

It also outlines an indicator implementation that displays columns as colored candles, since plotting every individual symbol would require many buffers. Common Point and Figure formations, including double and triple tops or bottoms, triangles, catapults, and 45-degree trend lines, are presented as potential breakout signals. The discussion is instructional rather than a systematic performance study: it supplies no signal backtest or evidence of trading profitability. The described indicator has limitations, including block-style rendering and incorrect operation in the Strategy Tester, and the example charting choices affect the resulting display.

Key ideas

• Point and Figure charts encode price changes in alternating rising and falling columns without using time as an axis.
• Box size controls symbol increments, while reversal amount determines when a new column starts.
• Minute-bar data can provide finer price tracking than coarser chart intervals.
• The article describes recognizable chart formations as possible support, resistance, and breakout signals.
• The sample indicator uses colored candles to represent columns and has stated testing and display limitations.

Tags

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