Point‐and‐Figure Charting
Similarly, for a box size of $2, a box is plotted for a downside unit move from $10
to $8, or lower. A move down from $10 to $6.01 only allows a single box to be
plotted whereas a move down to $6 or $5.99 allows two boxes to be plotted.defining and Quantifying Continuation and reversals
In Point‐and‐Figure charting, the number of boxes may be specified for a continu-
ation or reversal move. Normally, the box size itself represents the minimum move
required to create a new box in the direction of the current trend, whereas the
reversal size represents the minimum number of boxes required to create a new
box in the opposite direction. An X followed by another X, or an O followed by
another O are both considered as continuation moves. But if an X is followed by
an O or an O is followed by an X, both moves are considered to be potential con-
ditions for a reversal. By convention, a Point‐and‐Figure chart is usually referred
to by its reversal size rather than its continuation criterion, since its continuation
criterion is usually set to one box. As such, Point‐and‐Figure charts are referred to
as one‐box, two‐box, or three‐box reversal charts.
We usually refer to Point‐and‐Figure charts in terms of their box size and
reversal size, denoted as, for example, an N × M configuration, where N is the
box size and M the reversal size. Therefore a 1 × 3 reversal chart means that a
minimum unit move equivalent to one box is required for a continuation in price
and three boxes for a reversal in price. Sometimes the continuation box amount
is denoted as an actual unit move in price, such as $10. In such a configuration, a
1 × 3 chart is identical to a $10 × 3 chart. Some practitioners write it as a $10 ×
$30 chart. In all three configurations, a $10 move is required for a new continu-
ation box to be plotted, while a $30 move in the opposite direction is required in
order for a three‐box reversal to be plotted.
Let us now examine the three most widely used Point‐and‐Figure reversal charts.(1) One‐box reversal Charts For one‐box reversal charts, that is, 1 × 1 charts,,
both the continuation and reversal sizes are one box. Let us assume that box size
is $1. This means that the reverse size of one box is also $1. See Figure 15.3.
The column of 26 numbers on the far right is a chronological sequence de-
picting how the market moved over the entire period under observation. Initially,
price rises from $20 to $25. We therefore plot six continuation boxes, in the form
of rising Xs, as seen in column 1. At $25, price starts to decline. A new reversal
box is not drawn until price reverses a minimum distance of one box, that is, $1.
This means that once price reaches $25 − $1 = $24 or lower, a new reversal box
is plotted. As prices continue to fall from $23 to $22, new continuation boxes are
plotted as a column of declining Os, as seen in column 2. The reason for shifting to
column 2 in order to plot the Os is simply because the space that occupies $24 in
column 1 is already filled by an X. We have therefore no choice but to shift to the
next column to plot the O at $24. From $22, price reverses back to $23 and a new
reversal is plotted. As before, the space occupying $23 is already filled by an O in
column 2. We therefore need to shift to column 3 in order to plot an X at the $23
level. Price continues up to $24 and another continuation box is plotted, and so on.