Point & Figure Charts: A Timeless Tool for Price Trend Analysis

Another vital member of the noiseless chart family is the Point & Figure (P&F) chart. Much like Renko charts, Point & Figure charts are unidimensional, focusing solely on price movement while completely eliminating the time factor. 

Unlike traditional charts such as candlesticks that map price data over time, Point & Figure charts are constructed using columns of Xs and Os, where: 

• Xs represent rising prices 

• Os indicate falling prices 

These charts are widely regarded by many technical analysts as powerful tools for identifying long-term price trends and defining effective entry and exit points. They are also useful in assessing market sentiment through supply and demand dynamics for a particular stock or instrument. 

How to Create a Point & Figure Chart 

Point & Figure charts are structured differently from conventional chart types. Instead of plotting open, high, low, and close values over time, they rely on only one factor: price change. 

There are three key components involved: 

1. Box Size 

Each X or O is placed within a box, and the box size determines how much the price must move to create a new entry. This can be set: 

• As a fixed percentage (e.g., 2%, 3%, or 5%) of the prevailing price 

• Using the Average True Range (ATR), usually over a 20-day period, to reflect market volatility 

• Manually, as per the trader’s preference 

A larger box size smoothens the chart, filtering out small fluctuations but delaying reversals. A smaller box size shows quicker reversals but may introduce more noise. 

2. Reversal Parameter 

This value determines when a new column (trend change) should start. Commonly set at 3 times the box size, it can be customised (e.g., 2, 4, 5.5). For instance, if the box size is ₹1 and the reversal is set at 5, a ₹5 move is required to reverse the column. 

3. Price Data 

Charts can be based on closing prices or high/low prices. 

• Using closing prices results in fewer Xs and Os 

• Using highs/lows generates more entries, capturing broader movement 

Example: 
If a stock is trading at ₹100, with a box size of ₹1 and reversal set at 3: 

• The price must drop to ₹97 to start a new column of Os 

• After falling to ₹90 and then rising, a reversal to a column of Xs starts only when the price climbs to ₹93 (a ₹3 reversal) 

How to Read a Point & Figure Chart 

Point & Figure charts provide clear visual cues for identifying: 

• Support levels: Drawn as horizontal lines across identical lows in Os columns 

• Resistance levels: Drawn across identical highs in Xs columns 

These charts are also effective in detecting: 

• Double top/bottom breakouts 

• Triple top/bottom breakouts 

• Quadruple breakouts 

An important distinction: in Point & Figure charts, a double top breakout is seen as bullish, whereas in bar charts, the same pattern may be interpreted as bearish. 

Benefits of Using Point & Figure Charts 

• Focus purely on price movement, completely ignoring time 

• Eliminate market noise, making trend analysis cleaner 

• Clearly highlight support/resistance zones using columnar format 

• Enable traders to ride strong trends without being distracted by short-term volatility 

• Serve as a proven strategy tool for long-term price pattern analysis 

Limitations of Point & Figure Charts 

• Slow to react due to fixed box and reversal size requirements 

• Can cause entry or exit delays if price moves rapidly past key levels 

• Not ideal for short-term or intraday traders, as the chart ignores time-based detail 

• Traders may miss reversals if price shifts dramatically before the pattern reflects the change 

• Should not be used in isolation—best combined with candlestick charts or other indicators for live price tracking and risk control 

Points to Remember 

• Point & Figure charts are unidimensional, focusing entirely on price action 

• Time is excluded, so only meaningful price movements are captured 

• These charts are slower to respond, especially when large price moves occur quickly 

• Most effective for long-term trend analysis and not suited for quick trades or scalping