To apply Point-and-Figure (P&F) charting in trading, you use Xs and Os to track price movements without considering time. Xs show rising prices and Os show falling prices. It helps traders clearly spot breakouts, support, and resistance levels, making it easier to make buy or sell decisions based on price action alone.

What Is Point-and-Figure (P&F) Charting?

Point-and-Figure charting is a type of chart that shows only price movements. It doesn’t care about time or volume like other types of charts. It uses Xs to mark upward price changes and Os to mark downward ones. The main purpose of a P&F chart is to focus purely on price action by ignoring minor price fluctuations that might not matter to a trader in the long term. P&F charts help you clearly see the trend without being distracted by small changes in price or unnecessary data.

How Does P&F Charting Work in Trading?

In P&F charts, you need to set a few rules before starting. These rules are mainly two things: Box Size and Reversal Amount.

• Box Size: This is the amount of price movement required to add an X or O to the chart. For example, if you set a box size of ₹10, each time the price moves up by ₹10, an X will appear. If it falls ₹10, an O will appear.
• Reversal Amount: This is how much the price needs to reverse to start a new column. If you set the reversal amount to ₹30, a price drop of ₹30 will cause a switch from Xs to Os or vice versa.

When the price moves in the direction you're tracking (up or down) by the box size, it forms either an X or O. Once the price moves enough in the opposite direction (as defined by the reversal amount), the chart "reverses," and the marks change. This creates clean and simple patterns for you to follow.

Why Do Traders Use Point-and-Figure Charts?

Traders use P&F charts because they eliminate market noise and show clear, simple price trends. Unlike traditional charts, which show price changes over time, P&F charts focus only on significant price movements. This makes it easier for traders to spot important price levels like support and resistance, as well as patterns that indicate breakouts or reversals.

For example, if the price of a stock rises significantly, it will show up clearly as a column of Xs. If the price then drops and reverses enough (based on the reversal amount), it will switch to Os. This simple, clean representation of price action helps traders make faster and more accurate trading decisions. Traders also use P&F charts to avoid getting distracted by time-based fluctuations and focus only on the significant price movements that really matter for their trades.

How to Read Buy and Sell Signals on P&F Charts?

The main signals in P&F charting are buy signals and sell signals. These signals help traders know when to enter or exit a trade.

• Buy Signal: A buy signal appears when a column of Xs breaks above the previous column of Xs. This shows that the price is rising, and it’s a good time to consider buying.
• Sell Signal: A sell signal appears when a column of Os breaks below the previous column of Os. This indicates that the price is falling, and it might be a good time to sell or exit your position.

These signals give traders a clear and actionable direction, making it easier to take trades based on price action without overcomplicating things. It’s a very straightforward approach.

Which Trading Platforms Offer P&F Charts?

P&F charts are available on several popular trading platforms, such as TradingView, Zerodha Kite, StockCharts, and others. These platforms allow you to customize the box size and reversal amount according to your preferences. Most platforms make it easy to switch between different chart types, and P&F is often listed as one of the available options. You just need to look for it in the chart settings.

Using a platform with P&F charts can help you apply this strategy to your trading and monitor the price movements without getting distracted by time-based charts. The clean, simple nature of P&F charts makes them perfect for any trader looking for clarity and focus in their trading decisions.

Can You Combine P&F with Other Trading Strategies?

Yes, Point-and-Figure charting works well with other technical analysis tools. You can combine it with trendlines, moving averages, or oscillators like the RSI (Relative Strength Index) to improve your trading decisions. For example, if a buy signal appears on the P&F chart and the RSI is showing that the stock is not overbought, it could be a stronger signal to enter the trade.

Using multiple indicators helps reduce the chances of making a wrong decision, as you’re validating the signal from different angles. Combining P&F with other strategies can give you more confidence and increase your success rate in the market.