THE HAndbook oF TEcHnIcAl AnAlysIsPoint‐and‐Figure charting is a form of constant range bars where each unit
move in price is of a fixed or constant amount. Therefore each unit move in price
is not dependent on the amount of:
■ (^) Time that has elapsed
■ (^) Volume that was traded
■ (^) Transactions that were made
As a consequence, there is no time axis on a Point‐and‐Figure chart. The verti-
cal axis tracks price, while the horizontal axis tracks the progression of price once
it has satisfied a certain criterion. Time therefore is implicit in the charts by virtue
of its progressive motion toward the right, rather than an explicit feature on the
charts. Nevertheless, Point‐and‐Figure practitioners may still incorporate a certain
element of time into the charts by annotating the hour, day, month, or year direct-
ly on the chart. We shall see examples of such annotation in a subsequent section.
Since there is no explicit representation of time as an axis in Point‐and‐Figure
charting, conventional volume bars are also not usually displayed on Point‐and‐
Figure charts. As we have already seen in Chapter 6, volume may be plotted in
two ways, that is, either with respect to time or with respect to price. Volume
by time records the number of shares or contracts bought or sold over a certain
interval of time and this is plotted below each price bar on the chart’s time axis.
It tracks volume as a function of time. Alternatively, volume by price records
the total number of shares or contracts bought or sold at a certain price and is
plotted on the price axis instead. It tracks volume as a function of price. Many
Point‐and‐Figure practitioners opt to plot volume by price in order to track the
level of market participation at each price level. Prices that are associated with
large volume activity represent a potentially more effective barrier to future
price action. Notice in Figure 15.1 that the S&P 500 Large Cap Index found
support between 1350 and 1410 points, in the price range where large volume
activity was observed.
Devoted advocates for Point‐and‐Figure charting argue that the omission of
time and conventional volume by time is of no real consequence and that price
is all that truly matters since all information is already reflected or discounted
in price itself. They also contend that there is also no need to track volume since
price action is in itself a consequence of volume action. They argue that if there is
sufficient interest or demand, prices will rise, and vice versa. Hence, keeping track
of the effect of supply and demand is all that is required and there is no need to
also keep track of the cause for it.
In spite of this view, many technical analysts do still refer to conventional bar
or candlestick charting for time and volume information. It is important to bear
in mind that not all significant upside or downside movements in price are pre-
cipitated by strong demand or supply. Prices may still rise on declining volume,
signaling a potential reversal or deceleration in price. Without access to volume
information that directly reflects the level of demand and supply in the market,
there is no way for a technical analyst to infer whether a trend is potentially weak-
ening or strengthening.