Point and figure charts

Written by Forex Automaton   
Monday, 04 August 2008 10:47

Point and figure charting is one of the oldest methods of charting. The essential features of the point and figure charts is the discrete presentation and the non-linearity of time axis. The price axis is split into discrete cells, labeled depending on the net direction of the price movement, by "X" or "O". What makes the presentation efficient is the condition that in order for the time axis to advance, the price movement has to revert a present trend and exceed a certain threshold. Therefore, as long as the markets move little, the chart changes little or does not change at all -- thus conserving both presentation space (originally paper) and viewer's emotions. One can argue that by using such an "effective market time" rather astronomical time approach, one gains a better insight into the behavior of the market and is better able to identify the prevalent market patterns.

Tom Dorsey, considered the world expert on point and figure charting, explains the method in his book Point & Figure Charting: The Essential Application for Forecasting and Tracking Market Prices.

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Last Updated ( Friday, 11 September 2009 15:54 )