Point and Figure Toolbox

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Equis and MetaStock are registered trademarks of Equis International. All other product names or services mentioned are trademarks or registered trademarks of their respective owners. This product is not a recommendation to buy or sell, but rather a guideline to interpreting the specified analysis methods. This information should only be used by investors who are aware of the risk inherent in securities trading. Equis International accepts no liability whatsoever for any loss arising from any use of this product or its contents.

Contents
Point and Figure Toolbox 3
Introduction................................................................................................................................3 A Word about Trading...............................................................................................................4 Quick start information ..............................................................................................................5 Getting your data........................................................................................................................5 Creating a Watchlist...................................................................................................................7 Looking for signals ..................................................................................................................10 Analyzing the chart ..................................................................................................................11

What is Point and Figure?

15

How Does This Help Time-Oriented Charting? ......................................................................18

Point and Figure Patterns

19

Double Top ..............................................................................................................................19 Double Bottom.........................................................................................................................21 Bullish Signal...........................................................................................................................21 Bearish Signal ..........................................................................................................................22 Triple Top ................................................................................................................................23 Triple Bottom...........................................................................................................................24 Triangles ..................................................................................................................................25 Bearish Signal Reversed ..........................................................................................................27

Point and Figure Trendlines How to Use the Point and Figure Tools

29 31

The Indicators ..........................................................................................................................31 The Explorations......................................................................................................................38 The Expert Advisors ................................................................................................................40 The System Tests .....................................................................................................................41

How to Write Your Own Point and Figure Formulas

43

Current column ........................................................................................................................44 Column change ........................................................................................................................44 Current box ..............................................................................................................................45
Contents • i

.......................................46 Support......45 Resistance...............46 ii • Contents .............................................Trend direction.......................................................................................................................................................................................................................................................................................

For a more in depth study of Point and Figure. Some minor editing changes may be needed. such as changing the box size to be used. Point and Figure Toolbox • 3 . opening the door for anyone to write formulas for Point and Figure analysis. All these tools display accurately on time based charts as well. system tests. Also included is a pair of indicators to plot true 45 degree trendlines on Point and Figure charts. at the end of this manual is a complete explanation of the toolbox’s formula functions’ syntax. this toolbox will help you in your trading decisions. Steven Dorsey’s book is an excellent source. However. Whether you use the functions to write your own formulas. All these formulas are open. Anyone can read and modify them. The Point and Figure Toolbox was designed to add this capability to MetaStock. The most visible part of this toolbox is a group of indicators. explorations. The Point and Figure patterns used in this toolbox were taken from the book by Steven Dorsey: Point and Figure Charting. Most notably. it provides a pattern recognition trading system and plots support and resistance levels. they will work just as well with futures. It should be noted that the formulas and this manual were written with a bias toward stocks. However.Point and Figure Toolbox Introduction MetaStock has had the ability to display Point and Figure charts since its early DOS versions. Further. and experts. or just use the pattern trading system that is provided. it has not been possible to do any formula based analysis of these charts. which ignores time. This chart style. had no corresponding function commands. This makes it a true toolbox.

If you feel you need advice in this area. stops should always be used. the user of this toolbox has the final say in any trade. The signals are provided because they are ones generally used by a Point and Figure chartist. When a trade is entered. Neither the system tests nor the expert advisors with this toolbox have stops coded into them. It is the individual user’s responsibility to decide how to place these stops. The author of this toolbox does not make any promises on the performance of this system.A Word about Trading This toolbox has a pattern trading system which gives buy and sell signals. 4 • Point and Figure Toolbox . Everyone has their own ideas of appropriate risk and to what degree they need to protect their trades. It is incumbent upon the user to evaluate each signal and decide for himself if any of the signals are worthy of a trade. However. These signals are intended as alerts that a possible trading opportunity exists. please consult your broker or a financial advisor.

we will only make files for the S&P 500. You should see a window like the following: From here.Quick start information If you can’t wait to get started. you do not need to store your data on your hard drive. Click on the Look-up button to get the following window: Point and Figure Toolbox • 5 . the following steps describe how to create local data files and update them. Getting your data In version 9. However. To get the most out of this toolbox. In the File menu. If you do not already have local data. you can create data files for as many securities as you would like.0 of MetaStock. explorations and system tests will run substantially faster on local data than on data accessed through the Internet. please start here. select New and then Security. the steps below will show you how to begin using the system. 1. please examine the rest of this manual.0 allows 6000 securities per folder. For this quick start. MetaStock version 9. This is a reprise of the information in The DownLoader manual and assumes you are signed up with a data provider supported by The DownLoader. Start The DownLoader. The time will be well spent. Therefore. 2.

Change Group to S & P 500 Delete any text in the search field Click Select All Click OK You now return to the New Security window. Click OK. 11. Make sure the periodicity is set to Daily. 10. 4. It is recommended you use at least 500 records (about 2 years). 9.3. Your data files have 6 • Point and Figure Toolbox . This will return you to the main Downloader screen. This will store enough data for most securities to show several columns of Point and Figure data. 5. Set the First Date to how far back you want to see historical data. If you have no preference. Set the top line (the folder field) to where you would like the data stored. 6. 7. Make sure the Type is set to Stocks – Common. which should now have (MULTIPLE) displayed in three of the fields: 8. use “C:\MetaStock Data\S&P 500”.

13. then the plus in front of your C drive. In the Tools menu. Creating a Watchlist The most common Point and Figure charts use a box size of 1 and a reversal amount of 3. close the collection report and then close The DownLoader. A popular Point and Figure method narrows this definition to apply only when the security’s price is between 20 and 100. Click the plus in front of MetaStock Data 16. Click OK to go to the Vendor Selection Screen 18. If you are not currently connected to the Internet. You should see the folders on your hard drive. If you saved the new securities in the suggested folder then: 15. log on to the Internet now. but currently have no data in them. select Download Prices. To get the data: 12. This will bring up the Select Securities screen: 14. The folder is now listed on the right side 17. On the left hand side. Point and Figure Toolbox • 7 . click the plus in front of My Computer. Click the folder labeled SP 500 and then click the button labeled Add. Select your data Vendor and click OK When the download is finished.been made.

select The Explorer Highlight P & F Watchlist Maker and click Explore. 8 • Point and Figure Toolbox . This opens a window similar to the Open dialog. This brings up the Select Security screen: The steps to create a watchlist are listed below: 3. 2. Click the Add Securities button. the P & F Watchlist Maker is an exploration designed to identify the securities Point and Figure will work best with. The exact requirements it looks for are: • • • • 1. at least 500 records of data at least 5 columns in a Point and Figure chart the lowest price is at least 25 the highest price is no more than 100 Open MetaStock and in the Tools menu.In keeping with this.

Click OK to start the exploration. These securities can be saved to Favorites for easier access. 8. 10. click the Reports button. When the exploration is finished. 1. If you have any other folders you would like to include. click Select All. this will be C:\MetaStock Data\ SP 500 In the Tools menu. Click Open. 7.4. Select Local Data on the left side of the dialog Browse to the folder containing the data you wish to use. Point and Figure Toolbox • 9 . 6. You are returned to the Select Security window and all the securities from the selected folder are listed. 5. go back to Add Securities and select them as well. 9. Select the first security. If you followed the steps in Getting Your Data.

6. 4. Click Open. click on the last security (they should all be highlighted now). 5.2. Select Favorites from the left side of the dialog. Use the scroll bar to move to the bottom of the list While holding the shift key. 3. When the exploration finishes. you will get a report similar to the one below: 10 • Point and Figure Toolbox . 3. Looking for signals The same procedure used to create the watchlist is also used to find which securities have just completed one of the patterns identified by the trading system. Open MetaStock and in the Tools menu. Right-click on one of the highlighted securities and then leftclick on “Add to Favorites” in the pop up menu. 2. In the Tools menu. 7. Select P & F Pattern Search and click Explore. the selection of the securities to use is easier: 1. Click OK to start the exploration. 4. after running the watchlist maker and saving the watchlist. Click the Add Securities button. click Select All. However. select The Explorer.

later in this manual. The exploration shown above says it just had a double top and a bullish signal pattern. The P&F Short Commentary expert was also attached to the chart. the P&F Support Trendline and the P&F Resistance Trendline were plotted in the same inner window as the prices. it is not uncommon to see a security with non-zero values in several columns. Point and Figure Patterns. After opening the chart. Analyzing the chart After you have finished running an exploration. Below is a bar chart of Mettler Toledo. Point and Figure Toolbox • 11 . please refer to the section. By clicking on the column headings. For more information about these patterns. the final step is to examine the chart. A zero in a column means that pattern was not found for that security. you can sort for long or short signals. As some patterns are part of other patterns. A “1” means a buy signal was found.A “-1” means a sell short signal was generated.

On the last bar. This was in conjunction with a bullish signal pattern. the current bullish signal pattern on the rally supports the previous signal. This does not leave much room for further price movement before resistance is encountered. 12 • Point and Figure Toolbox . a third bullish signal pattern has just occurred. the security broke through the P&F Resistance Trendline with a move a large enough to change the overall trend to Bullish. However. here is the same data in a Point and Figure chart. Finally.A double top pattern back in November 2002 marks the beginning of an uptrend. The current closing price is above the half-way point of the channel formed by the support and resistance trendlines. the current trend has shown the ability to exceed this resistance. Even though this pattern failed to move higher. two bullish signal patterns have formed during this securities climb from a low of 25 to its current price of 39. In August 2003. Since then.

Point and Figure Toolbox • 13 .The support and resistance trendlines looked choppy on this chart because downtrend is barely established before it is being reversed. There are several indications that this is a good signal and one caution of the nearby resistance trendline. Changing the chart to weekly or monthly to look at the longterm price trends. you can take or reject the trade based on just this information. Analyzing the sector or industry group this security belongs to. Analyzing the market as a whole. you would need to make the final decision. If you are satisfied. Looking at the chart using candlesticks or another price style. You can also seek confirmation of the signal by: • • • • • Plotting other indicators on the bar chart. At this point. they were replaced with the P&F 45 Up indicator. This shows the same uptrend but started a little earlier. Therefore.

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If you change either one. both of these values are set when the chart is drawn. another X will be placed in the same column. Put an X in this box. assign one box the value of 50. What is Point and Figure? • 15 . O’s are drawn in another column. the movement will be drawn in a single column. In MetaStock. right above the previous X. it is a graphical depiction of supply and demand. if not longer. About the middle of the page. start with a normal piece of graph paper. As the price moves back and forth. In its most basic form. As supply begins to outpace the demand. The reversal amount is how many boxes the price must move against the current direction to trigger a reversal. The price movement from one value to another might be done in a day or in a year. As long as the movement does not retrace far enough to trigger a reversal. Assume a security has a price of $50.What is Point and Figure? Point and Figure has been around for at least a century. The key values in Point and Figure are the box size and the reversal amount. The box size is the amount the price must move before a new X or O is drawn on the chart. columns are added to the right side of the chart. To better understand how Point and Figure is drawn. X’s are marked as prices move up to denote increasing demand. For this example. If the price moves to 51. the chart can look dramatically different. This steady advance to the right is not affected by time. let each box represent $1.

In this example. When this occurs. we will use a reversal amount of 3.50 is read as being in box 53. This means the price must move 3 boxes before a single O can be drawn.If the price then moves to 52. Therefore. 16 • What is Point and Figure? . 53. One more aspect when counting downward: a value of $52. and 52. If this trend continues till the price reaches $55. Since the price did move a full $1 from 52 to 53.75. an X can not be placed in the 53 box. only one more X is placed in this column. the column will have 6 X’s in it. in the example with an X in box 55. the price must fall to 52 or less to trigger a reversal.25. an O is drawn in boxes 54. Now the price may begin to fall. This X represents a move to 52.

a new column is always started to the right of the current column and offset by one box from the previous column. As the prices move up and down. levels of support and resistance can be identified. By watching for places where the prices repeatedly reverse. If the prices were to fall to $47 before starting upward again. the chart will plot the extent of each move. This is why the previous example started drawing O’s in the 54 box instead of starting in the 52 box.Please note. What is Point and Figure? • 17 . A further example of this is shown below. the next column of X’s would begin in the 48 box.

These patterns. Point and Figure patterns are precise. have differences. Unlike bar chart patterns. Ten people can look at a chart and plot ten different levels of support and resistance. these levels become much clearer. while similar to the bar chart patterns of the same name. Additionally. the exact values would differ and no two would be exactly alike. A column will be a set amount higher or lower than a previous column or columns. they are easily defined and easily recognized. These mathematically precise definitions allow for: • • • • Easier referencing in formulas Explorations looking for the patterns Trends to be defined by the relationship of the prices to the support and resistance levels Multiple scenarios in system study and development. 18 • What is Point and Figure? . While there would almost definitely be places they agreed on. Again. With Point and Figure. Point and Figure charts have their own pattern formations.How Does This Help Time-Oriented Charting? Support and resistance levels have always been subject to interpretation. which use approximations for retracements and percentage moves.

the descriptions below should help you identify them. The actual pattern is not highlighted or otherwise marked on the chart. a double top is defined as a column of X’s rising to the same level as the previous column of X’s and then exceeding it. However. This is a bullish signal as the prices have just broken a level of resistance. Double Top In Point and Figure.Point and Figure Patterns This toolbox was written to search for nine specific patterns: • • • • • • • • • Double Top Double Bottom Bullish Signal Bearish Signal Triple Top Triple Bottom Bullish Triangle Bearish Triangle Bearish Signal Reversed When found. the expert advisors place a buy or sell arrow on the bar which finishes the pattern. Point and Figure Patterns • 19 .

The implication is that prices should continue moving upward. When they reached the level at which they stalled the last time. the prices continued to climb higher.Looking at the chart. but stops are especially important when trading with this pattern. In practice. you will see that the prices climbed to a certain value and then stalled. 20 • Point and Figure Patterns . They fell back and then started to climb again. this signal is very common and does not always yield good results. Securities forming this pattern should not be ignored.

you will see that the prices dropped to some value and stopped. Looking at the chart. This is a bearish signal as the prices have just broken through their previous support. the column of O’s between them has to find support at a higher level than the previous column of O’s. In practice. They rallied and climbed for a while and then started to fall again. the prices continued to drop. The implication is that prices should continue falling. Point and Figure Patterns • 21 . Do not ignore this pattern. this signal is very common and does not always signal good trades. but look for confirmation signals and check your stops. Bullish Signal The bullish signal is a special form of the double top pattern. In addition to the second column of X’s rising above the first. When they reached the level at which they stopped last time.Double Bottom A double bottom is created when a column of O’s falls to the same level as the previous column of O’s and then drops even lower.

the prices fell to some level and established support. the second column of O’s must fall below the first. the implication is that prices should continue rising. stops are important. Like the standard double top. However. they climbed past the resistance previously encountered. In addition. As with all trades. unlike double tops. support was found at a higher level than was previously established. When they fell. Like double bottoms. 22 • Point and Figure Patterns . the second column of X’s must not rise as high as the previous column of X’s. Rising again. This pattern incorporates rising lows with higher highs. Bearish Signal The bearish signal is a special form of the double bottom pattern. this pattern has some additional confirmation built in. This pattern is fairly common and is a better signal than normal double tops. the prices moved upward until they encountered resistance.Looking at a bar chart. As they rebounded.

the previous support was insufficient and they continued to fall. Triple Top The triple top pattern further refines the criteria of the double top. As they fell. The last three columns of X’s are examined. Point and Figure Patterns • 23 . This time. the bullish signal pattern is contained inside the triple top pattern. the prices encountered support and began to move upward again. Occasionally. As they fell. in which case the first column of O’s will reach lower than the second. The first and second must rise to the same point and the third must extend past them. The implied downward movement of the prices should continue. Set stops and watch your exit conditions. resistance was found sooner and the prices were forced downward again. this pattern includes a confirmation of the movement.Looking at a bar chart. Like the Bullish Signal. Resistance is pushing the prices lower at the same time as the previous support level fails. the prices climbed until resistance pushed them back down.

be sure to place appropriate stops. Still. This pattern is a strong buy signal as the resistance level is more firmly established. When they rose the third time. The last column must fail to find the same support and move further downward. the prices would pierce this resistance and continue upward. there could be quadruple tops or even longer patterns. it should serve to further verify the signal. if an inspection of the chart shows the resistance level to have been around for more than this pattern identifies. only to encounter resistance. However. Practically. Theoretically. 24 • Point and Figure Patterns . the prices would rise twice. This would require the most recent column of X’s to have a lower high than the previous column. Triple Bottom The triple bottom formation is an extended version of the double bottom pattern. when a triple top occurs. The first and second must find support at the same level. the bearish signal pattern is incorporated into the triple bottom pattern.Looking at the chart. The more strongly this is established. a pattern longer than a triple top is rarely seen. Occasionally. these additional columns only serve to further reenforce the level of resistance. The last three columns of O’s are compared. the more significant the breakthrough is. That said.

This is strong sell signal. this support would be insufficient and the prices would continue to fall.Looking at a bar chart. the prices would find support at some level. Below is an example of a bullish triangle. It consists of both X and O columns shrinking until the prices finally break out. Notice how the second X column encounters resistance before the previous column did. Triangles This pattern requires 5 columns to form. it underscores the importance of this pattern. do not neglect setting appropriate stops. Point and Figure Patterns • 25 . When they move lower a third time. Still. rise and then fall to the same support level. the signal is further validated. but can be longer. If the bearish signal is also represented. This narrowing continues until the last X column forms a bullish signal pattern by breaking out of the triangle pattern. The second O column found support above the first. If an examination of the chart shows this support level to have been set even earlier. After establishing support and confirming it in the previous two columns of O’s. its failure to hold on the third approach is much more significant.

but breakouts from triangles usually have exceptional strength behind them. This is sometimes referred to as congestion. The tighter the apex of the triangle. Looking at a bar chart. This closing of competing support and resistance levels forms a pressure cooker in which the prices eventually explode outward. the narrowing of the support and resistance levels could be observed. the second X column finds resistance before the first. Set stops just in case unexpected news or other actions negate the strength of this move. It is not within the scope of this toolbox to predict which way the price will go. Notice the second O column finds support sooner.The bearish triangle is shown below for comparison. the stronger the breakout should be. Its pattern is nearly identical. The highs and lows of the price movements would draw closer and closer. 26 • Point and Figure Patterns . This pattern is completed when the bearish signal forms as the support indicated by the second column of O’s is broken. In the same way.

Point and Figure Patterns • 27 .Bearish Signal Reversed This is the longest pattern included in this toolbox. As the prices move downward. the consecutive bearish signals only serve to confirm each other and the prevailing trend. When the double top is formed. they suddenly surge upward breaking through the last resistance level. Set stops to lock in your profits and to protect against sudden reversals. The prices are consistently making lower lows and lower highs. It is not so much one pattern as it is the combination of four separate patterns. The strength of this pattern is in the sudden and strong movement against the prevailing trend. expect the prices to move. This pattern can be watched as it forms. a second and then a third bearish signal pattern are formed. Each bearish signal is in sequence with the last bar of one being the first bar of the next. The bearish signal reversed starts with a normal bearish signal. Then a double top is made off the column of X’s in the last bearish signal. Until the double top is formed. but this signal is usually worth waiting for. Then.

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Therefore. with Point and Figure. Point and Figure Trendlines • 29 . The line is then drawn connecting these two points. below is a sample chart using # where the line would be drawn: A matching trendline is usually drawn on the opposite side of the column. a trendline is drawn between any two points. these are drawn by picking a peak or trough and starting the line in middle of the box just above or below that column. The next point is found by moving over one column and up or down one box. Typically. This toolbox addresses the forty-five degree trendlines. When the prices break through a trendline. a new trend is starting and the lines are then redrawn to reflect the new trend. They are used to identify trends and mark support and resistance levels. On bar charts and other time-oriented price styles. For illustration purposes. you can get both the short-term trend from the column and the long-term trend from the trendlines.Point and Figure Trendlines Trendlines are a standard feature of technical analysis. This process is repeated for as many columns as the line is desired. Point and Figure charts only use flat horizontal lines and fortyfive degree angle lines.

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How to Use the Point and Figure Tools The Indicators ** P & F Values ** IMPORTANT: This indicator is very important to all Point and Figure Toolbox formulas. threshold:=2. Do not delete or rename this indicator. The formula would then look like this: How to Use the Point and Figure Tools • 31 . if you wanted to change the box size from 1 to 0. The values after the equal sign can be changed and then saved.5. and the trendline threshold. { setting data to 0 uses the High Low range } box:=1. For example. you could do so. If you wish to adjust the Point and Figure parameters used by other toolbox formulas. you should edit this indicator. If this indicator is deleted or renamed. If you do. reversal:=3. reversal amount. It is referenced by all other Point and Figure formulas. the data array to use. This indicator contains several short lines of text. you will see the following text: data:=0. the other Point and Figure formulas will not work until it is restored. which set the default values for the box size.

it can be restored by manually re-typing it: 1. the formulas will not match the MetaStock chart Finally. { setting data to 0 uses the High Low range } box:=0. reversal:=3. 5. Capitalization does not matter here. If this is different.5. The other indicators and their uses are described below. type in the five lines of code listed above. The value on the data line is the price data using in calculating the Point and Figure formulas. or the formula will no longer work correctly. with no extra spaces before or after the name 4. 3. do not add this indicator to a chart as it will not plot anything. Please note that the semicolon at the end of the line was not changed. If everything is entered correctly. the indicator editor will close. Just make sure the punctuation is exact. Click OK. 2. In the formula window. If this indicator is deleted or otherwise lost. Open the Indicator Builder Click New Type in the following text for the name: ** P & F Values ** This must be entered exactly as listed above. threshold:=2. This semicolon is required by the MetaStock formula language and cannot be removed. 32 • How to Use the Point and Figure Tools .data:=0. This should be set to the same setting selected in the Point and Figure properties window.

Once a trend is detected. this means that after a breakout. The support and resistance trendline indicators require one more comment. the formula plots either a 1 for a bullish trend. this indicator graphically shows the current value of the box last drawn on a Point and Figure chart. A breakout requires the prices to move the threshold amount outside the current trend channel.P & F Current Box When plotted in a chart. The new level of support and resistance is drawn for all dates contained within the column. It is normally used with the P & F Support Trendline indicator. This means that the past bars. The indicator adjusts to reflect trendline breakouts. Other arguments for this action exist. It automatically adjusts itself to changes in trends or breakouts of the current trend channels. P & F New Column This indicator plots a flat line with a spike where a Point and Figure chart has switched to a new column. all dates within a given column must have the same value. It can also be used to gauge how close the prices are to a reversal. but the stated one is predominant. On other price styles. the indicator will position itself at the high and low of the column that triggered the breakout. P & F Support Trendline This plots the support level for the Point and Figure chart. Warning of this change is mentioned here to prevent any confusion when this happens. P & F Resistance Trendline This plots the resistance level for the Point and Figure chart. If either of the Point and Figure Expert Advisors is attached. will have the support and resistance lines redrawn. It is included as an alternate way to identify these switching points. P & F Trend This indicator doesn’t plot anything until the toolbox detects a trend. These indicators adjust to reflect breakouts. For this indicator to plot correctly in a Point and Figure chart. this indicator is not needed. potentially weeks of data. This is useful in overlaying a Point and Figure analysis on other price styles. On a Point and Figure chart. this adjustment is more dramatic. A breakout requires the prices to move the threshold amount outside the current trend channel. This rule necessitates the re-drawing of the trendline. It is intended to be used in conjunction with the P & F Resistance Trendline indicator. or a -1 for a How to Use the Point and Figure Tools • 33 . A trend requires at least 5 columns of Point and Figure data.

4.bearish trend. 8. looking something like the chart below. please use the following procedure: 1. select Data Window). 9. you will get the following window: 7. Open the Data Window (in the View menu. Set the value of the box you want the line to start at. enter the date from the starting column. In the first three boxes. note the date it displays and the box values. the trendline will be plotted in your chart. Just as they adjust for breakouts. In the data window. This trend calculation is based on the breakouts of the support and resistance indicators. Clicking OK. this indicator also changes the recent historical values to reflect a change in the trend. Now plot the indicator in the same window as the prices. 34 • How to Use the Point and Figure Tools . When it is plotted in your chart. 2. 3. 6. usually 1 box above or below those listed in the Data Window. Change the chart to a Point and Figure chart Making sure the chart style properties match the values in the “** P & F Values **” indicator. Locate the place where you want the trendline to start and position your mouse over that column. P & F 45 Down For this indicator to work properly. 5.

It may take some practice to correctly anchor the starting point. How to Use the Point and Figure Tools • 35 . After the trendline is plotted in the chart and looks correct on the Point and Figure chart. In a time-based chart. this will resemble a series of stair steps as seen in the chart below. The trendline will be carried over to the new price chart and plot the values corresponding to the Point and Figure chart. you can change the chart back to your chosen price style.

Open the Data Window (in the View menu.P & F 45 Up For this indicator to work properly. please use the following procedure: 1. note the date it displays and the box values. 5. Locate the place where you want the trendline to start and position your mouse over that column. 3. 4. you get the following window: 36 • How to Use the Point and Figure Tools . 6. 2. In the data window. Now plot the indicator in the same window as the prices. Change the chart to a Point and Figure chart Making sure the chart style properties match the values in the “** P & F Values **” indicator. When it is plotted in your chart. select Data Window).

7. After the trendline is plotted in the chart and looks correct on the Point and Figure chart. enter the date from the starting column. 8. looking something like the chart below. Set the value of the box you want the line to start at. the trendline will be plotted in your chart. It may take some practice to correctly anchor the starting point. Clicking OK. usually 1 box above or below those listed in the Data Window. 9. In the first three boxes. you can change the chart back to your chosen price style. The How to Use the Point and Figure Tools • 37 .

Please note. the explorations provided with this toolbox will perform better. If either is found. If a 38 • How to Use the Point and Figure Tools . The last column is always a buy signal and will display a 1 when this is true. P & F Pattern Search This exploration is designed to scan through a group of securities and return a list of those which have just formed a new pattern. The first four report bullish (buy) and bearish (sell short) versions of the signal. The Explorations Four explorations are provided for Point and Figure trading. The report is divided into five columns. it is not possible to say how much data will be needed for a chart to show several columns of data. Since Point and Figure is not time based. this will resemble a series of stair steps. In a time based chart. The Point and Figure Toolbox does not require a set number of records. if you load at least 500 records. the list shows a 1 in the respective column for buy signals and a -1 for sell signals.trendline will be carried over to the new price chart and plot the values appropriate to the Point and Figure chart. However.

click OK. The modified exploration is now ready for use. if you want the exploration to only look at 5 days. click on this exploration and then click Edit. Change the number 10 to the desired number of trading days you want included in this scan. P & F Recent Patterns This exploration gives the same report as the P & F Pattern Search exploration. Column A is selected by default. How to Use the Point and Figure Tools • 39 . Below is a sample report from this exploration. this exploration can be edited and the number changed. The first line in each of the columns A through E is the text: days:=10. change this line to: days:=5. If a longer lookback period is desired. and E. After making the change in column A. click the tab for column B and repeat the process. The difference is that this exploration looks for any signal within the last 10 trading days.column does not have a buy or sell signal for its pattern. The lower half of the Explorer Editor has seven tabs labeled columns A through F and Filter. D. If all the changes were made correctly. To change the lookback. Make sure the semicolon remains at the end of the line. open The Explorer. the Exploration Editor will close. it shows a 0. For example. After changing column E. Make the same changes to columns C.

This Expert Advisor is not intended to be used with a real-time chart. P & F Watchlist Maker This exploration allows you to refine your list of securities to increase the validity of the Point and Figure signals. However. Both the column and the trend are identified by either a 1 (if the security is in an up trend or an X column) or a -1 (when the security is in a down trend or an O column). Symbols are placed on the chart to show the completion of Point and Figure patterns. The expert colors the price bars blue or red to show where a point a figure chart would be drawing a column of X’s or O’s. This exploration also filters out securities with less than 500 periods and whose Point and Figure chart contains less than 5 columns. and a commentary gives some suggestions on how to approach these signals. P & F Short Commentary This Expert Advisor colors the price bars and adds symbols to charts the same as the P & F Full Commentary expert. The Expert Advisors P & F Full Commentary This is the main Expert Advisor provided with the Point and Figure toolbox. Since MetaStock can only use 1 box size for the whole chart. candlesticks. its commentary is just a status screen and makes no mention of Point and Figure patterns. 40 • How to Use the Point and Figure Tools .P & F Status Report This exploration is designed to scan through a list of securities and report the current column. Many Point and Figure chartists believe a box size of 1 is only valid when the prices are between 20 and 100. the current box. an extra buffer of 5 points was added to the bottom range. the trend (if any). If a security’s price moves outside that range. and the support and resistance values of that trend. etc). this exploration looks for securities whose price is between 25 and 100. The resulting list contains securities whose price action is sufficient to generate the buy and sell patterns. The commentary is calculation intensive and can dramatically slow down a system when used on a live chart. Since prices tend to fall faster than they rise. It is designed to be used on time based chart (Open/High/Low/Close bars. then the box size should be adjusted up or down to compensate and retain valid signals.

it is the same. How to Use the Point and Figure Tools • 41 . P & F Pattern System This system searches for triple tops. experts. If the results of the optimization over a large group of stocks are to your liking.This allows it to display the commentary significantly faster. Since Point and Figure is not time based. That is. you can edit the “** P & F Values **” indicator and input the numbers derived by the optimization. P & F Pattern System w/ opt This system is the same as the P & F Pattern System. except it optimizes the box size and reversal amount. However. In all other respects. a trade is taken and then held until the prices draw near the appropriate trend channel line and then pull back. long trades are held until the price moves to the resistance line and then start to fall. bearish and bullish triangles. and indicators to use these new values. These patterns are more common and the moves are often shorter. the system tests provided with this toolbox will be more likely to find the Point and Figure patterns. bearish and bullish signals. When one of these is found. The System Tests The Point and Figure Toolbox does not require a set number of records. The double top and double bottom patterns were not included in this test. and bearish signal reversed patterns. if you load at least 500 records. Short trades are held until the prices have dropped near to the support line and then start to climb. triple bottoms. it is not possible to say how much data will be needed for a chart to show several columns of data. This would change all the explorations.

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This can be any positive integer. The first three are factual values: the current column (X or O).0 allows a formula to get one of six different values about Point and Figure charts. such as the Stochastic Oscillator.How to Write Your Own Point and Figure Formulas The Point and Figure Toolbox provided with MetaStock 9. If you want to use the High – Low range. The function will return the corresponding value. The second set of three are a calculation of the current support and resistance trendlines and the direction of the trend. The format is the same for all six functions: ExtFml("PointFig. Enter either the short or long name. the value of the current box in the current column. RETURN VALUE – Identifies which of the six Point and Figure values you wish to use. Normally this will be the Open. DATA ARRAY. These values are summarized in the following table: How to Write Your Own Point and Figure Formulas • 43 . It should also be noted that any other value can be used here. BOX SIZE – The box size used in creating the Point and Figure chart. RETURN VALUE ) DATA ARRAY – The data the Point and Figure chart is to be calculated on. All six queries can be done in any MetaStock formula and can be combined to create practically any Point and Figure based formula desired. Point and Figure can also be calculated on the High – Low range. and whether or not a new column just started. a moving average or even some other security’s data. High. Low. REVERSAL AMOUNT – The number of boxes required for a reversal. THRESHOLD VALUE.pointfig". using the high when the price is going up and the low when the price is falling. THRESHOLD VALUE – The number of boxes the trendlines must be penetrated by to trigger a trendline breakout. set the data value to 0. or Closing price. This can be any positive integer. BOX SIZE. This can be any positive number. REVERSAL AMOUNT.

ExtFml("PointFig. box:= LastValue(FmlVar("** P & F Values **".data."THRESHOLD")). box:= LastValue(FmlVar("** P & F Values **"."REVERSAL")). reva:= LastValue(FmlVar("** P & F Values **"."BOX")).box.pointfig"."THRESHOLD")). Each example shows the formula to get the Point and Figure information for a chart created using the values in the “** P & F Values **” indicator."DATA"). 44 • How to Write Your Own Point and Figure Formulas .reva.thresh. If the Point and Figure chart is currently in an X column of ascending prices. this returns a 1. thresh:=LastValue(FmlVar("** P & F Values **"."REVERSAL")). Current column Formula: data:= FmlVar("** P & F Values **". reva:= LastValue(FmlVar("** P & F Values **". thresh:=LastValue(FmlVar("** P & F Values **"."BOX")).The individual return values are further explained below."DATA"). If the chart is in an O column of descending prices. Column change Formula: data:= FmlVar("** P & F Values **". this function returns a -1.c ol) This returns either a 1 or a -1 depending on which column the chart is currently displaying.

thresh:=LastValue(FmlVar("** P & F Values **".box. This means that if you use a box size of 2. This function returns the value of that box.pointfig". box:= LastValue(FmlVar("** P & F Values **".reva.pointfig". (i."THRESHOLD"))."DATA")."REVERSAL")).: 2.box."BOX")).ExtFml("PointFig.t nd) Trend is a general term used to describe a prevailing direction of the How to Write Your Own Point and Figure Formulas • 45 ."DATA"). box:= LastValue(FmlVar("** P & F Values **"."BOX")). 6. 8.e. the prices are always in a box whose value is evenly divisible by 2. However. on the period that triggers a reversal. thresh:=LastValue(FmlVar("** P & F Values **". reva:= LastValue(FmlVar("** P & F Values **".pointfig"."REVERSAL")). 4. The box is a multiple of the box size. etc).reva. Trend direction Formula: data:= FmlVar("** P & F Values **". it is always calculated as being in a specific box. Current box Formula: data:= FmlVar("** P & F Values **".data.reva.thresh.data.thresh."THRESHOLD")). reva:= LastValue(FmlVar("** P & F Values **". this function returns a 1.box.thresh.data. ExtFml("PointFig.b ox) No matter what data is charted. ExtFml("PointFig.r ev) This function normally just returns the value zero.

However. This function attempts to detect and quantify these moves.pointfig". Support Formula: data:= FmlVar("** P & F Values **". ExtFml("PointFig. box:= LastValue(FmlVar("** P & F Values **"."REVERSAL"))."DATA").pointfig".reva.thresh.box. This returns the value of the box for the bottom line of the trendline 46 • How to Write Your Own Point and Figure Formulas . The formula adds an extra half box size for display purposes in Point and Figure charts. and a -1 if these lines are trending down.thresh. The extra half box size results in the line being drawn through the middle of the box above the X columns instead of the top edge of the column.5*box).data. reva:= LastValue(FmlVar("** P & F Values **". or trend. ExtFml("PointFig."THRESHOLD")).box. thresh:=LastValue(FmlVar("** P & F Values **". a general up or down move that persists over several columns is more significant.data. reva:= LastValue(FmlVar("** P & F Values **". It returns a 1 if the automatic support and resistance lines are trending up."THRESHOLD")). Resistance Formula: data:= FmlVar("** P & F Values **". This returns the value of the box for the top line of the trendline channel. box:= LastValue(FmlVar("** P & F Values **"."REVERSAL")).reva. thresh:=LastValue(FmlVar("** P & F Values **". The columns of a Point and Figure chart describe the short term price moves."DATA")."BOX")).t op)+(.b ot)-(1."BOX")).prices.5*box).

• 47 .channel. The formula subtracts one and one half box sizes for display purposes in Point and Figure charts. This shift moves the line to the middle of the box below the O columns instead of the top edge of the column.

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