Point and figure charts: an overview
by Charles Idol
The popularity of the personal computer has given rise to a bewildering number of charting techniques.
In addition to a profusion of moving averages of one kind or another, we have linear regressions,
stochastic methods, Fibonacci arcs, Gann angles and any number of applications of mathematical
techniques to stock data. This is progress, I suppose.
The drawback comes when this abundance shoves from the scene one of the most established and
venerable charting methods, one which embodies a unique philosophy as well as a very clever technique.
Point and figure (P&F) charting evolved over a long period and has been used by several generations of
traders in the stock and commodities future markets. Its application rests on the philosophy that the
opinion of the investing community dominates the behavior of stocks and the market price epitomizes
This viewpoint is the antithesis of fundamentalism. You accept the truism that the real value of the stock
comes simply from what someone wants to pay for it. It follow that, with proper presentation, you can see
the ebb and flow of the community's opinion in the price action.