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A point and figure chart is a charting technique used in technical analysis. Unlike plotting price against time in other techniques, it plots price against change in direction by plotting a column of Xs as the price rise and a column of Os as the price falls.

The technique is hundred years old and was first written and showed by “Hoyle” in his book in 1898. The first book/manual dedicated to point and figure was written by Victor Devilliers in 1933. There was a time when traders kept track of price rise by writing them in columns and later referred to them as ‘figure charts’. They also used Xs instead of numbers and these charts came to be known as ‘point charts’. Traders started using both figure and point charts and therefore the technique came to be known as ‘figure and point chart’.

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Point And Figure Charts It is difficult to draw a figure and point chart for a large number of stocks. Therefore chartists use the summary prices at the end of each day. Some prefer to use the day’s closing price and some use the day’s high or low depending on the direction of the last column. The charts are prepared by deciding on the value of Xs and Os. Any change below the decided value is ignored. So ‘figure and point chart’ act as filters to filter smaller price change. The chart changes columns when the price changes direction by the value of a certain number of Xs or Os. The most commonly used is the 3 box reversal chart.

Figure and point charts are drawn on squared papers and therefore 45 degree lines may be used to indicate up trends and down trends from important highs and lows in the chart allowing objective analysis of the trend.

It is used to study price target, both vertical and horizontal. The vertical method measures the length of the thrust and horizontal method measures the width of a congestion pattern for price target.

With the computerization of the share market, it has become convenient for traders to view a number of charts and also alter them simultaneously. Presently the value of Xs and Os are set to a percentage than just price. This allows the sensitivity of figure and point charts to remain constant no matter what the price level is.

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