Point and Figure Toolbox

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

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

What is Point and Figure?

15

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

Point and Figure Patterns

19

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

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

29 31

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

How to Write Your Own Point and Figure Formulas

43

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

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

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

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

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

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

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

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

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

after running the watchlist maker and saving the watchlist. 4. 5. Click the Add Securities button. However. Click Open. Right-click on one of the highlighted securities and then leftclick on “Add to Favorites” in the pop up menu. the selection of the securities to use is easier: 1. select The Explorer. 7. 6. 3. Select P & F Pattern Search and click Explore. click on the last security (they should all be highlighted now). Click OK to start the exploration. you will get a report similar to the one below: 10 • Point and Figure Toolbox . Select Favorites from the left side of the dialog. 3.2. Open MetaStock and in the Tools menu. 2. click Select All. When the exploration finishes. In the Tools menu. 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. Use the scroll bar to move to the bottom of the list While holding the shift key. 4.

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

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

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

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

Since the price did move a full $1 from 52 to 53. the column will have 6 X’s in it. Now the price may begin to fall. One more aspect when counting downward: a value of $52. 53.75. When this occurs. In this example. an O is drawn in boxes 54. Therefore. and 52. we will use a reversal amount of 3. an X can not be placed in the 53 box. the price must fall to 52 or less to trigger a reversal. If this trend continues till the price reaches $55. only one more X is placed in this column. 16 • What is Point and Figure? . This means the price must move 3 boxes before a single O can be drawn.If the price then moves to 52. in the example with an X in box 55.25. This X represents a move to 52.50 is read as being in box 53.

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

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

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

this signal is very common and does not always yield good results. the prices continued to climb higher. The implication is that prices should continue moving upward. Securities forming this pattern should not be ignored. When they reached the level at which they stalled the last time. In practice.Looking at the chart. 20 • Point and Figure Patterns . 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 .

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