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

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

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

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

Start The DownLoader. the following steps describe how to create local data files and update them. Click on the Look-up button to get the following window: Point and Figure Toolbox • 5 . we will only make files for the S&P 500.0 allows 6000 securities per folder. 1. Therefore.0 of MetaStock. However. please start here. 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. please examine the rest of this manual. In the File menu. You should see a window like the following: From here. select New and then Security. the steps below will show you how to begin using the system. you can create data files for as many securities as you would like. explorations and system tests will run substantially faster on local data than on data accessed through the Internet. MetaStock version 9. If you do not already have local data. The time will be well spent. For this quick start.Quick start information If you can’t wait to get started. Getting your data In version 9. 2. you do not need to store your data on your hard drive. To get the most out of this toolbox.

Set the top line (the folder field) to where you would like the data stored. This will store enough data for most securities to show several columns of Point and Figure data. 10. Set the First Date to how far back you want to see historical data. Make sure the Type is set to Stocks – Common. Your data files have 6 • Point and Figure Toolbox . Click OK. which should now have (MULTIPLE) displayed in three of the fields: 8.3. 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. 6. 4. It is recommended you use at least 500 records (about 2 years). If you have no preference. Make sure the periodicity is set to Daily. 7. This will return you to the main Downloader screen. 11. 5. 9. use “C:\MetaStock Data\S&P 500”.

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

Click the Add Securities button. 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. select The Explorer Highlight P & F Watchlist Maker and click Explore. 8 • Point and Figure Toolbox . the P & F Watchlist Maker is an exploration designed to identify the securities Point and Figure will work best with. 2. This opens a window similar to the Open dialog.In keeping with this. This brings up the Select Security screen: The steps to create a watchlist are listed below: 3.

8. Select Local Data on the left side of the dialog Browse to the folder containing the data you wish to use. Select the first security. Click OK to start the exploration. this will be C:\MetaStock Data\ SP 500 In the Tools menu. You are returned to the Select Security window and all the securities from the selected folder are listed. go back to Add Securities and select them as well.4. These securities can be saved to Favorites for easier access. 9. When the exploration is finished. If you followed the steps in Getting Your Data. Click Open. 5. 7. click Select All. 10. 1. Point and Figure Toolbox • 9 . If you have any other folders you would like to include. 6. click the Reports button.

click Select All. click on the last security (they should all be highlighted now). Use the scroll bar to move to the bottom of the list While holding the shift key. 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. 7. Select Favorites from the left side of the dialog. 4. 5. Click the Add Securities button. 3. Select P & F Pattern Search and click Explore. 3. When the exploration finishes. after running the watchlist maker and saving the watchlist. select The Explorer. you will get a report similar to the one below: 10 • Point and Figure Toolbox . However.2. 4. Right-click on one of the highlighted securities and then leftclick on “Add to Favorites” in the pop up menu. Click Open. Open MetaStock and in the Tools menu. 6. In the Tools menu. 2. Click OK to start the exploration. the selection of the securities to use is easier: 1.

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

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

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

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

an X can not be placed in the 53 box. an O is drawn in boxes 54. This X represents a move to 52. the column will have 6 X’s in it. In this example. 16 • What is Point and Figure? . One more aspect when counting downward: a value of $52. Now the price may begin to fall. Therefore. When this occurs. This means the price must move 3 boxes before a single O can be drawn.If the price then moves to 52. we will use a reversal amount of 3. in the example with an X in box 55.25.75.50 is read as being in box 53. the price must fall to 52 or less to trigger a reversal. 53. only one more X is placed in this column. and 52. Since the price did move a full $1 from 52 to 53. If this trend continues till the price reaches $55.

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

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

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 actual pattern is not highlighted or otherwise marked on the chart. This is a bullish signal as the prices have just broken a level of resistance. Double Top In Point and Figure. the descriptions below should help you identify them. However. Point and Figure Patterns • 19 . the expert advisors place a buy or sell arrow on the bar which finishes the pattern. 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.

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

They rallied and climbed for a while and then started to fall again. When they reached the level at which they stopped last time. Point and Figure Patterns • 21 . the prices continued to drop. you will see that the prices dropped to some value and stopped. The implication is that prices should continue falling. this signal is very common and does not always signal good trades. This is a bearish signal as the prices have just broken through their previous support. Looking at the chart. In practice. Do not ignore this pattern.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. 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. the column of O’s between them has to find support at a higher level than the previous column of O’s.

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

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

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

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

the stronger the breakout should be. 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. the second X column finds resistance before the first. Looking at a bar chart.The bearish triangle is shown below for comparison. 26 • Point and Figure Patterns . but breakouts from triangles usually have exceptional strength behind them. In the same way. This closing of competing support and resistance levels forms a pressure cooker in which the prices eventually explode outward. The highs and lows of the price movements would draw closer and closer. Notice the second O column finds support sooner. Its pattern is nearly identical. This pattern is completed when the bearish signal forms as the support indicated by the second column of O’s is broken. The tighter the apex of the triangle. This is sometimes referred to as congestion. the narrowing of the support and resistance levels could be observed.

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

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The line is then drawn connecting these two points. you can get both the short-term trend from the column and the long-term trend from the trendlines. For illustration purposes. 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. 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. Point and Figure Trendlines • 29 . They are used to identify trends and mark support and resistance levels. This process is repeated for as many columns as the line is desired.Point and Figure Trendlines Trendlines are a standard feature of technical analysis. Point and Figure charts only use flat horizontal lines and fortyfive degree angle lines. a new trend is starting and the lines are then redrawn to reflect the new trend. On bar charts and other time-oriented price styles. with Point and Figure. This toolbox addresses the forty-five degree trendlines. When the prices break through a trendline. Therefore. a trendline is drawn between any two points. Typically.

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

the formulas will not match the MetaStock chart Finally. it can be restored by manually re-typing it: 1. with no extra spaces before or after the name 4. threshold:=2. This semicolon is required by the MetaStock formula language and cannot be removed. Capitalization does not matter here. 2. do not add this indicator to a chart as it will not plot anything. Click OK. Please note that the semicolon at the end of the line was not changed. If everything is entered correctly. 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.data:=0. 5. The other indicators and their uses are described below. In the formula window. 32 • How to Use the Point and Figure Tools . If this is different. If this indicator is deleted or otherwise lost. type in the five lines of code listed above. or the formula will no longer work correctly. the indicator editor will close. 3.5. { setting data to 0 uses the High Low range } box:=0. The value on the data line is the price data using in calculating the Point and Figure formulas. Just make sure the punctuation is exact. reversal:=3. This should be set to the same setting selected in the Point and Figure properties window.

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

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

It may take some practice to correctly anchor the starting point. After the trendline is plotted in the chart and looks correct on the Point and Figure chart. this will resemble a series of stair steps as seen in the chart below. How to Use the Point and Figure Tools • 35 . In a time-based chart. 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.

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

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

it is not possible to say how much data will be needed for a chart to show several columns of data. this will resemble a series of stair steps. Since Point and Figure is not time based. If a 38 • How to Use the Point and Figure Tools . Please note. The Point and Figure Toolbox does not require a set number of records. If either is found. the explorations provided with this toolbox will perform better. In a time based chart.trendline will be carried over to the new price chart and plot the values appropriate to the Point and Figure chart. The last column is always a buy signal and will display a 1 when this is true. the list shows a 1 in the respective column for buy signals and a -1 for sell signals. The report is divided into five columns. 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. if you load at least 500 records. However.

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

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

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

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

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

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

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

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