V.7:12 (449-452): Gann analysis on point and figure charts by Douglas Arend

Gann analysis on point and figure charts by Douglas Arend

Of the many analytical techniques attributed to W.D. Gann, perhaps none is more widely followed than the so-called geometric angles. Although applied generally to historical and intraday bar charts, this method also can be used with point and figure or, as they are sometimes called, reversal charts. In this case, the emphasis is on price alone rather than the combination of price and time.

P&F basics

Constructing daily point and figure (P&F) charts starts by determining the scale of the box (number of price ticks per square) and reversal (number of boxes necessary to change from advancing to declining). Using these parameters, plot only price changes that are greater than or equal to the box size and disregard movements of lesser amounts. Advances are indicated by columns of Xs and declines by Os. Although this technique also can record intraday price changes, I am focusing here on daily movements.

If prices have been advancing lately then a column of Xs is building. At the conclusion of each day record increases of at least the box size by adding the appropriate number of Xs in progressively higher boxes within the current column. If prices do not increase by one box size or more and, instead, decline by at least the reversal amount, move one column to the right and begin charting Os in the same manner, beginning one square below the highest X in the preceding column and moving progressively lower. Continue to record price changes in this way, ignoring movements of less than the box size and intraday fluctuations.