Trading with Point Figure Charts

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					                   Trading with Point & Figure Charts

                                              PnF University

Dorseywright.com




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History of Point and Figure Technical Analysis.

A brief history of Point and Figure Charting along with some statistics on sector timing versus market
timing.




The premise of Point & Figure charting is to provide a logical, organized and sensible way of recording
the supply and demand relationship in any particular security or sector. When it is all said and done, if
there are more buyers in a particular security than there are sellers willing to sell, the price will rise. On
the other hand, if there are more sellers in a particular security than there are buyers willing to buy, then
the price will decline. If buying and selling are equal, the price will remain the same. This is the irrefutable
law of supply and demand. The same reasons that cause price fluctuations in produce such as potatoes,
corn and asparagus cause price fluctuations in securities. - taken from the book "Point and Figure
Charting" by Tom Dorsey.




The chart above depicts the first style of Point & Figure charts. Over the years, they have evolved. Today,
the price is located on the vertical axis and the "figures" are replaced with X's and O's. X's represent
demand and are always moving up the chart while O's represent supply and are always moving down the
chart.

This methodology was prominent in the 1960's but then dropped out of favor. This form of technical
analysis is unique and to become a craftsman requires study. By attending this on-line University you are
well on your way to becoming a craftsman. You will learn more about this in Lesson 1.




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Welcome:
Lesson 1: Introduction
Here we go!                                                                In this section we will list any
This chapter is designed to familiarize you with Point and Figure          upcoming live online classes
Charts, we call these "attributes" in this University. For those that are specifically covering this chapter.
familiar with PnF and have used it in their investment research, you will
know most of these terms and concepts. However, it is good for a
review as terms used in this chapter will be repeated throughout the
University. This chapter does include vital information for basic charting
and it shouldn't be skipped over as it is a foundation for the following
chapters. Chapter 1 is the base and each chapter following is a vital
component in understanding the big picture, how to put it all together.
One cannot understand the whole without knowing the parts.


Lesson 1 Contents:

Part 1: Attributes of a Chart                         Part 2:     Chart Basics
         Attributes                                               Three box reversal
         Box Scales                                               Box scale tables
         Dates and date lines                                     Flow chart of investing
         Trading bands                                            Examples of how to chart
         Numbers and letters for the months                       Support Lines
Part 3: Support Lines
         Bullish Support Line
         Bullish Resistance Line
         Bearish Resistance Line
         Bearish Support Line

Test yourself at the end of the chapter to sharpen your skills.

If you have any questions, please check the "Questions" section to see if it has already been answered. If
it has not, then click on the question mark icon below to email us your question. It will be answered
shortly (within two business days).




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Welcome:
Lesson 1: Part 1. Attributes of a Chart



Here is a Point and Figure Trend Chart with the characteristics pointed out and described. We will go into
detail as we continue through the first lesson.

A Point and Figure Trend Chart:
The trend chart depicts the price action of the stock. We call it the trend chart because of the support and
resistance lines that determine whether a chart is above or below trend. If someone say's "...the trend
chart" you know they mean this type of chart, this is different from an RS chart for example.

                * X's mean the chart is rising
                * O's mean the chart is declining.
Key Points:
                * Never will you see X's in a column of O's or vice versa.
                * Each column must have at least three X's or three O's.




You will notice some
columns have
numbers or letters in
place of an X or an
O. (In blue). These
depict months:
1 = January
2 = February
3 = March
This continues until
October in which...
A = October
B = November
C = December
This is because two
digit numbers
wouldn't fit in the
box.


Value / Price           The vertical axis is the price scale. From this you can determine the value
column                  of each row.
                        These are hyphenated as "Bot" for the bottom of the trading band, "Med"
                        for the medium of the trading band and "Top" for the top of the trading
Trading Bands:
                        band. Applications of the the Trading Bands will be discussed in later
                        chapters.
                        The Bullish Support Lines and Bearish Resistance Lines help us
Trend Lines:
                        determine the trend of the stock.




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Welcome:
Lesson 1: Part 2. Chart Basics:



Details of the individual chart characteristics.


                                   The scale for a point and figure chart is on the left hand side or the
                                   vertical axis. By looking at the price increments of the scale we can
Value/ Price Column
                                   determine the box size at that level.

Box sizes:                                           Price of Stock    Box Size
Changes are
determined by the price                                 0.00 - 5.00      0.25
range of the stock or                                  5.00 - 20.00      0.50
index. Here is a guide                               21.00 - 100.00      1.00

to those changes.
                                                          + 102.00       2.00



Examples:                    0.25 box     0.50 box         1.0 box      2.0 box     Notice how the increments work,
What the price columns                                                              how the value changes and is
would look like in the         5.00         9.00            40.00       120.00      determined by the box size.
                               4.75         8.50            39.00       118.00
various box sizes:             4.50         8.00            38.00       116.00
                               4.25         7.50            37.00       114.00
                               4.00         7.00            36.00       112.00
                               3.75         6.50            35.00       110.00
                               3.50         6.00            34.00       108.00

Crossing Box Sizes:               0.25 to 0.50 box             0.50 to 1.00 box          1.0 to 2.0 box
There are times when a
stock will cross several          6.00                         22.00                     104.00
                                  5.50                         21.00                     102.00
box sizes. Here is an             5.00      change here        20.00       change here   100.00           change here
example of what that              4.75                         19.50                      99.00
price column would                4.50                         19.00                      98.00
look like:                        4.25                         18.50                      97.00
                                  4.00                         18.00                      96.00




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