Point and Figure Toolbox

All Rights Reserved Copyright  2004 Printed in the U.S.A. Equis International, Inc. 90 South 400 West Suite 620 Salt Lake City, UT 84101

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

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

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

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

3. Set the First Date to how far back you want to see historical data. 6. use “C:\MetaStock Data\S&P 500”. Make sure the periodicity is set to Daily. 9. which should now have (MULTIPLE) displayed in three of the fields: 8. This will return you to the main Downloader screen. 10. 5. Click OK. Your data files have 6 • Point and Figure Toolbox . Make sure the Type is set to Stocks – Common. Set the top line (the folder field) to where you would like the data stored. It is recommended you use at least 500 records (about 2 years). This will store enough data for most securities to show several columns of Point and Figure data. If you have no preference. 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. 7. 4. 11.

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

select The Explorer Highlight P & F Watchlist Maker and click Explore. The exact requirements it looks for are: • • • • 1. 2. 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. This brings up the Select Security screen: The steps to create a watchlist are listed below: 3. Click the Add Securities button. This opens a window similar to the Open dialog.In keeping with this. 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.

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

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

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

the current bullish signal pattern on the rally supports the previous signal. The current closing price is above the half-way point of the channel formed by the support and resistance trendlines. a third bullish signal pattern has just occurred. Since then. 12 • Point and Figure Toolbox . 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. This does not leave much room for further price movement before resistance is encountered. However. This was in conjunction with a bullish signal pattern.A double top pattern back in November 2002 marks the beginning of an uptrend. In August 2003. 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. On the last bar. Finally. here is the same data in a Point and Figure chart.

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

.

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

Now the price may begin to fall. 53.If the price then moves to 52. 16 • What is Point and Figure? . Therefore. This means the price must move 3 boxes before a single O can be drawn. If this trend continues till the price reaches $55. This X represents a move to 52. in the example with an X in box 55. Since the price did move a full $1 from 52 to 53. we will use a reversal amount of 3. only one more X is placed in this column. the price must fall to 52 or less to trigger a reversal. an X can not be placed in the 53 box.75.25. In this example. When this occurs.50 is read as being in box 53. and 52. One more aspect when counting downward: a value of $52. an O is drawn in boxes 54. the column will have 6 X’s in it.

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. the next column of X’s would begin in the 48 box. a new column is always started to the right of the current column and offset by one box from the previous column. What is Point and Figure? • 17 . If the prices were to fall to $47 before starting upward again. This is why the previous example started drawing O’s in the 54 box instead of starting in the 52 box.Please note. As the prices move up and down. the chart will plot the extent of each move.

Again. 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. These patterns. 18 • What is Point and Figure? . which use approximations for retracements and percentage moves. these levels become much clearer. have differences. With Point and Figure.How Does This Help Time-Oriented Charting? Support and resistance levels have always been subject to interpretation. 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. Additionally. they are easily defined and easily recognized. Point and Figure patterns are precise. Point and Figure charts have their own pattern formations. Ten people can look at a chart and plot ten different levels of support and resistance. Unlike bar chart patterns. While there would almost definitely be places they agreed on. while similar to the bar chart patterns of the same name.

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

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

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

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

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

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

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

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

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. Each bearish signal is in sequence with the last bar of one being the first bar of the next. Until the double top is formed. Then. The prices are consistently making lower lows and lower highs. a second and then a third bearish signal pattern are formed. This pattern can be watched as it forms. Set stops to lock in your profits and to protect against sudden reversals. Point and Figure Patterns • 27 . Then a double top is made off the column of X’s in the last bearish signal. expect the prices to move. As the prices move downward. but this signal is usually worth waiting for.Bearish Signal Reversed This is the longest pattern included in this toolbox. they suddenly surge upward breaking through the last resistance level. The bearish signal reversed starts with a normal bearish signal. the consecutive bearish signals only serve to confirm each other and the prevailing trend. When the double top is formed.

.

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. For illustration purposes. Point and Figure Trendlines • 29 . The next point is found by moving over one column and up or down one box.Point and Figure Trendlines Trendlines are a standard feature of technical analysis. a trendline is drawn between any two points. Therefore. This toolbox addresses the forty-five degree trendlines. On bar charts and other time-oriented price styles. Point and Figure charts only use flat horizontal lines and fortyfive degree angle lines. with Point and Figure. Typically. you can get both the short-term trend from the column and the long-term trend from the trendlines. these are drawn by picking a peak or trough and starting the line in middle of the box just above or below that column. 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. When the prices break through a trendline. The line is then drawn connecting these two points. This process is repeated for as many columns as the line is desired.

.

For example. you should edit this indicator. and the trendline threshold. Do not delete or rename this indicator. If this indicator is deleted or renamed. if you wanted to change the box size from 1 to 0. you could do so. The formula would then look like this: How to Use the Point and Figure Tools • 31 . If you do. This indicator contains several short lines of text.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. { setting data to 0 uses the High Low range } box:=1. If you wish to adjust the Point and Figure parameters used by other toolbox formulas. reversal amount. It is referenced by all other Point and Figure formulas. The values after the equal sign can be changed and then saved. reversal:=3.5. the other Point and Figure formulas will not work until it is restored. which set the default values for the box size. the data array to use. you will see the following text: data:=0.

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

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

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

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

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

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

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

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

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

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

.

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

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

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

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

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.channel. • 47 .

Sign up to vote on this title
UsefulNot useful