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Point and Figure Charts

Things You Should Know About Point And Figure Counts

Point and Figure Charts is a vast module. We have gone through a lot of topics since the beginning of this module. However, there are a few more things to learn such as: 

 

1) Targets have no time-scale

Although we have been given a target, there is no time-scale for its achievement. The fact is that Point and Figure charts have no time-scale, so it is impossible to calculate when a target - vertical or horizontal - will be reached. It is futile to attempt to do so. 

 

2) Nearest counts must be achieved first

On the upside, lower targets have to be achieved before a higher count can be considered. If a lower target is not achieved, then the achievement of the higher count is obviously impossible.

By all means, select counts that cluster around a target, but do not select one that is double the next target. Its presence on the chart will give you a distorted view of the future.

 

3) Clustering of counts

We have already been advised to avoid trying to count every column; however, there will be times when a number of valid counts, both vertical and horizontal, may be obtained from the same area of the chart. Normally when there is a horizontal count, there will be a vertical count from the breakout column. Any clustering of these multiple targets reinforces the likelihood of that particular target being achieved.

 

4) Negating a count

Not all counts will be achieved, so there has to be a process for removing them from your analysis. A vertical upside count is negated when the price falls below the low that anchored the count.

Conversely, a downside count is negated when the price rises above the top that anchored it. 

 

5) Combining counts with trend lines

The validity of counts is enhanced by the use of trend lines, especially 45° trend lines.

An upside count is more likely to be achieved if it occurs when the count column is above a 45° bullish support line. 

A downside count is more likely to be achieved if it occurs below a 45° bearish resistance line.

We need to be very careful when we establish a count on the opposite side of the prevailing trend. They can, however, be useful because their achievement or non achievement does explain more about the underlying nature of the trend in place.

 

6) Improbable and Impossible counts

Always be on the lookout for counts that are impossible or improbable. Impossible counts are easier to spot because they give a figure that is impossible. This can only happen with downside counts and occurs when the downside count yields a value less than 0.

Often, if this happens, the next column can be used.

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