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

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

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

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

0 allows 6000 securities per folder. In the File menu. please start here.Quick start information If you can’t wait to get started. the steps below will show you how to begin using the system. you do not need to store your data on your hard drive. 2.0 of MetaStock. Getting your data In version 9. The time will be well spent. 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. explorations and system tests will run substantially faster on local data than on data accessed through the Internet. 1. However. MetaStock version 9. If you do not already have local data. select New and then Security. you can create data files for as many securities as you would like. the following steps describe how to create local data files and update them. please examine the rest of this manual. we will only make files for the S&P 500. Therefore. You should see a window like the following: From here. To get the most out of this toolbox. Start The DownLoader. Click on the Look-up button to get the following window: Point and Figure Toolbox • 5 . For this quick start.

7. use “C:\MetaStock Data\S&P 500”. Your data files have 6 • Point and Figure Toolbox . 9. 11. which should now have (MULTIPLE) displayed in three of the fields: 8. 5. 4. 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. Set the First Date to how far back you want to see historical data. This will return you to the main Downloader screen. This will store enough data for most securities to show several columns of Point and Figure data. It is recommended you use at least 500 records (about 2 years). Make sure the periodicity is set to Daily. Click OK. If you have no preference. 10.3. Set the top line (the folder field) to where you would like the data stored. Make sure the Type is set to Stocks – Common.

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

the P & F Watchlist Maker is an exploration designed to identify the securities Point and Figure will work best with. This opens a window similar to the Open dialog.In keeping with this. select The Explorer Highlight P & F Watchlist Maker and click Explore. 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. 2. This brings up the Select Security screen: The steps to create a watchlist are listed below: 3. The exact requirements it looks for are: • • • • 1. 8 • Point and Figure Toolbox . Click the Add Securities button.

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

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

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

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

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

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

only one more X is placed in this column. If this trend continues till the price reaches $55. Now the price may begin to fall. 16 • What is Point and Figure? . This means the price must move 3 boxes before a single O can be drawn. In this example. This X represents a move to 52. the column will have 6 X’s in it. an X can not be placed in the 53 box. and 52. Since the price did move a full $1 from 52 to 53.If the price then moves to 52. 53. an O is drawn in boxes 54. Therefore. One more aspect when counting downward: a value of $52. When this occurs. the price must fall to 52 or less to trigger a reversal.25. we will use a reversal amount of 3.50 is read as being in box 53. in the example with an X in box 55.75.

A further example of this is shown below. 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. As the prices move up and down. the next column of X’s would begin in the 48 box. levels of support and resistance can be identified. 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. This is why the previous example started drawing O’s in the 54 box instead of starting in the 52 box.

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

the descriptions below should help you identify them. However.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. Double Top In Point and Figure. This is a bullish signal as the prices have just broken a level of resistance. The actual pattern is not highlighted or otherwise marked on the chart. a double top is defined as a column of X’s rising to the same level as the previous column of X’s and then exceeding it. Point and Figure Patterns • 19 . the expert advisors place a buy or sell arrow on the bar which finishes the pattern.

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

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

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

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

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

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

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

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

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

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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 should edit this indicator. reversal amount. you could do so. This indicator contains several short lines of text. if you wanted to change the box size from 1 to 0. you will see the following text: data:=0. the data array to use. reversal:=3. The formula would then look like this: How to Use the Point and Figure Tools • 31 . If you do. It is referenced by all other Point and Figure formulas. The values after the equal sign can be changed and then saved. and the trendline threshold. which set the default values for the box size. If this indicator is deleted or renamed. Do not delete or rename this indicator. threshold:=2. If you wish to adjust the Point and Figure parameters used by other toolbox formulas. { setting data to 0 uses the High Low range } box:=1.5. the other Point and Figure formulas will not work until it is restored. For example.

Please note that the semicolon at the end of the line was not changed. If this is different. do not add this indicator to a chart as it will not plot anything. 3. The other indicators and their uses are described below. 32 • How to Use the Point and Figure Tools . Click OK. The value on the data line is the price data using in calculating the Point and Figure formulas. In the formula window. This should be set to the same setting selected in the Point and Figure properties window.data:=0. This semicolon is required by the MetaStock formula language and cannot be removed. type in the five lines of code listed above. the formulas will not match the MetaStock chart Finally. 2.5. 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. Just make sure the punctuation is exact. or the formula will no longer work correctly. it can be restored by manually re-typing it: 1. { setting data to 0 uses the High Low range } box:=0. If this indicator is deleted or otherwise lost. Capitalization does not matter here. threshold:=2. with no extra spaces before or after the name 4. 5. reversal:=3. If everything is entered correctly. the indicator editor will close.

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

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

It may take some practice to correctly anchor the starting point. 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. 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. you can change the chart back to your chosen price style.

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

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

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

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

P & F Watchlist Maker This exploration allows you to refine your list of securities to increase the validity of the Point and Figure signals. Since MetaStock can only use 1 box size for the whole chart. However. This exploration also filters out securities with less than 500 periods and whose Point and Figure chart contains less than 5 columns. the current box. Since prices tend to fall faster than they rise. Both the column and the trend are identified by either a 1 (if the security is in an up trend or an X column) or a -1 (when the security is in a down trend or an O column). Symbols are placed on the chart to show the completion of Point and Figure patterns. and the support and resistance values of that trend. 40 • How to Use the Point and Figure Tools . The resulting list contains securities whose price action is sufficient to generate the buy and sell patterns. the trend (if any). an extra buffer of 5 points was added to the bottom range. etc). The Expert Advisors P & F Full Commentary This is the main Expert Advisor provided with the Point and Figure toolbox. candlesticks. its commentary is just a status screen and makes no mention of Point and Figure patterns. then the box size should be adjusted up or down to compensate and retain valid signals.P & F Status Report This exploration is designed to scan through a list of securities and report the current column. 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. The commentary is calculation intensive and can dramatically slow down a system when used on a live chart. 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. It is designed to be used on time based chart (Open/High/Low/Close bars. If a security’s price moves outside that range. this exploration looks for securities whose price is between 25 and 100. Many Point and Figure chartists believe a box size of 1 is only valid when the prices are between 20 and 100. 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.

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

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

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

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

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

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

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