Point and Figure Charts

History
This technique is over 100 years old. A detailed history can be found in ‘The Definitive Guide to Point and Figure' written by Jeremy du Plessis. He explains that they were first described in a number of books between 1898 and 1910, but the first book dedicated to it was published in 1933 by Victor De Villiers.

These charts were automated by computer in the early 1980s by the Indexia company run by Jeremy Du Plessis. This automation increased the popularity and usage of these charts

Construction
Point and Figure charts display an 'X' when prices rise by the 'box size' and display an 'O' when prices fall by the box size. No change is made, if prices rise or fall by an amount that is less than the 'box size'.

Each column can contain either Xs or Os, but never both. In order to change columns (e.g., from an X column to an O column), prices must reverse by the "reversal amount" multiplied by the box size. For example, if the box size is 3 points and the reversal amount is 2 boxes, then prices must reverse direction 6 points (3 times 2) in order to change columns.

If you are in a column of Xs, the price must fall 6 points in order to change to a column of Os. If you are in a column of Os, the price must rise 6 points in order to change to a column of Xs. The changing of columns signifies a change in the trend of prices.

Study the Point and Figure chart given below and compare it with the bar chart.