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Technical Analysis

Point and Figure Chart

A point and figure chart plots columns of X and O marks for rising and falling prices, adding a new column only when price reverses by a set number of boxes.
Also Called
  • P&F Chart
  • PnF Chart
  • Point & Figure Chart
  • X and O Chart
  • Three-Box Reversal Chart
By InsiderFinance TeamUpdated Sources & Methodology

A $48 Breakout and Two Count Objectives

A $48 Breakout and Two Count ObjectivesPoint and figure chart with 8 alternating X and O columns, a 1-dollar box and a 3-box reversal. Highlighted column 7 supplies the vertical count.$40$41$42$43$44$45$46$47$48$4912345678Column Sequence →
A $48 Breakout and Two Count ObjectivesPoint and figure chart with 8 alternating X and O columns, a 1-dollar box and a 3-box reversal. Highlighted column 7 supplies the vertical count.$40$41$42$43$44$45$46$47$48$4912345678Column Sequence →

Vertical Count: $57

$45 + 4 boxes × $1 × 3

Horizontal Count: $62

$41 + 7 columns × $1 × 3

X marks rising boxes. O marks falling boxes. The shaded row defines the horizontal count.

The seventh column breaks above $47. Four quiet observations add no marks; the next O column fixes its four-box length. Vertical count: $57. Horizontal count: $62.
On This Page
  1. What is a point and figure chart?
  2. Point and figure construction: box size and three-box reversal
  3. Point and figure double top breakout example
  4. How to calculate a point and figure vertical count
  5. How to calculate a point and figure horizontal count
  6. Point and figure trendlines, time and related charts
  7. How traders use point and figure signals
  8. Limitations of point and figure charts
  9. Bottom line
  10. FAQ

Key Takeaways

  • X columns record upward box levels and O columns downward levels. Horizontal spacing counts column changes.
  • Box size, reversal amount, grid origin, price source and starting column decide every mark, so match them before comparing two charts.
  • In the fixed three-box example, each new reversal column begins with at least three marks; the initial seed is specified separately.
  • Signals are mechanical rather than drawn: an X column that rises one box above the prior X column is a double top buy, and an O column that falls one box below the prior O column is a double bottom sell.
  • The example calculates an upside vertical objective from the completed signal column and a horizontal objective from seven selected congestion columns.
  • A one-box-per-column trendline has a 45-degree visual angle when the grid cells are square.

What is a point and figure chart?

A point and figure chart is a price chart built from columns of X and O marks, where each mark is one price box. X columns record rising prices and O columns record falling prices. A new column starts only when price reverses by a set number of boxes, classically three, so small moves are filtered out and the horizontal axis counts reversals rather than time.

Set the box size, reversal amount, grid origin, source-price rule and initial state. Those inputs define the sequence.

Point and figure construction: box size and three-box reversal

The example uses a $1 grid and three-box reversal. For an active X column, first test whether the completed observation’s high fills another X. If it does not, test whether the low reaches three boxes below the top X. Apply the mirror rule to an O column.

Each reversal column begins with at least three marks. The supplied initial column starts from a stated seed, then extends as observations arrive.

A price must reach the box to fill it: a falling price of $41.10 leaves the $41 box empty, and the example’s $40.90 low fills it.

Formula

Bullish vertical count target = low box of the count column + (boxes in that column × box size × reversal amount). Bullish horizontal count target = low of the congestion pattern + (columns in the pattern × box size × reversal amount). New column starts when price moves (reversal amount × box size) against the current column.
  • Box size is the price interval each X or O represents; moves smaller than one box are not plotted.
  • Reversal amount is the number of boxes price must travel against the current column before a new column begins, classically three.
  • The selected bullish count column spans four boxes, $45 through $48. Its later three-box reversal fixes that length for the vertical calculation.
  • The selected congestion spans the first seven columns at the $45 row and has a lowest box of $41. Count those seven columns for this horizontal example.
  • Bearish counts use either the full reversal multiplier or a reduced two-thirds multiplier; name the one behind any downside target.
  • For nonconstant box sizes, use the count method defined for that scale. The worked formulas here use a fixed $1 grid.

Point and figure double top breakout example

A fixed $1, three-box reversal chart uses completed daily highs and lows and a whole-dollar grid. Its bottoming observation reaches $40.90, filling the $41 O box. Each new observation first tests extension of the current column, then reversal if no extension occurs.

  • The lowest O is $41. A high of $44.35 clears the $44 reversal threshold and starts X boxes at $42, $43 and $44.
  • A further high of $47.20 extends the same column to six X boxes spanning 42 through 47.
  • A pullback low of $43.80 clears the three-box reversal from 47 and starts an O column at 46, 45 and 44; the $43 box stays empty because it needs a print at or below $43.00.
  • The next leg to a $48.10 high starts a new X column at 45 through 48, one box above the prior X column top of 47, which is a double top buy signal at 48 and makes this four-box column the count column.
  • The later O-column reversal fixes the count column at four X boxes, $45 through $48. Vertical objective: $45 + 4 × $1 × 3 = $57.
  • The first seven selected congestion columns intersect the $45 row and have a $41 low. Horizontal objective: $41 + 7 × $1 × 3 = $62.

Four later observations stay between $45.40 and $47.90 and add no marks: extension needs $49 and reversal needs $45. A final $44.90 low starts O boxes at $47, $46 and $45, fixing the preceding four-box X column. The selected counts then give $57 vertically and $62 horizontally.

The $48 mark exceeds the prior X-column high of $47, satisfying the double-top breakout rule. The figure also plots the earlier congestion columns that the horizontal count uses.

How to calculate a point and figure vertical count

Four observations between $45.40 and $47.90 add no marks. The active X column needs $49 to extend and $45 to reverse.

The next completed observation reaches $44.90, starting O marks at $47, $46 and $45. That reversal fixes the preceding X column at four boxes, from $45 through $48.

Using the bullish vertical count, objective = $45 + 4 × $1 × 3 = $57. Before the reversal, an additional X would change the count.

How to calculate a point and figure horizontal count

The first seven selected columns intersect the $45 row. Their congestion low is the $41 box, and the final selected X column breaks above the prior $47 ceiling.

The horizontal objective is $41 + 7 × $1 × 3 = $62. The bracket on the figure identifies exactly which columns contribute.

Each count method draws on different columns, and bearish objectives use either a full reversal multiplier or a reduced two-thirds multiplier. Note the rule beside each target.

One-box-per-column diagonals form 45-degree lines on square grid cells. Column position shows reversal sequence; source timestamps supply elapsed time. Additional studies can display volume from the source record.

Use Renko for a related construction with one brick per horizontal position. Standard Candlesticks organize OHLC by their selected intervals.

How traders use point and figure signals

Define the breakout trigger, market-price entry, invalidation, size and exit. Options Flow shows whether calls hit the ask as the double-top buy signal printed, and the Options Profit Calculator prices each structure at the $57 vertical or $62 horizontal objective.

Limitations of point and figure charts

  • Fix the box size, reversal amount, grid origin and price source before trading the signals, since each one sets where the columns, signals and counts fall.
  • Pick the objective method before the trade. The same breakout gives $57 by vertical count and $62 by horizontal count, and bearish counts use a full or a two-thirds multiplier.
  • Fix the vertical count once a reversal completes the column. Another X before then changes the target.
  • The grid counts reversals, so one column can span a single session or many weeks. Check the source timestamps for elapsed time and a separate study for volume.
  • A price jump fills every box it crosses at once, so check the source prints before treating a mark as a price that traded.

Bottom line

A point and figure chart filters out small moves and time to show the sequence of meaningful price reversals. State the box size, reversal amount and price source, act on the mechanical breakout signals, and name the count method behind every target.

Clear answers

Frequently Asked Questions

Sources and Further Reading

  1. Thomas J. Dorsey, Point and Figure Charting, fourth edition (Wiley, 2013), chapters 2–3
  2. Fidelity Research Glossary: Point and Figure Charts, Box Size and Reversal
  3. Van Powell, Point & Figure Charting, Technical Analysis of Stocks & Commodities V.11:1 (30-33)
  4. Anderson and Faff, Point and Figure Charting: A Computational Methodology and Trading Rule Performance in the S&P 500 Futures Market (International Review of Financial Analysis, 2008)
  5. Park and Irwin, What Do We Know About the Profitability of Technical Analysis? (Journal of Economic Surveys, 2007)

How entries are sourced, calculated and updated: editorial methodology.

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Related Terms

Candlestick Chart

A candlestick chart is a price chart that draws each interval’s open, high, low and close as a candle with a real body and upper and lower shadows.

Chart Patterns

Chart patterns are recognizable price structures, such as rectangles, triangles, flags and head and shoulders, that traders read as reversal or continuation setups.

Trendline

A trendline is a straight line drawn through price pivots, such as rising swing lows or falling swing highs, that shows a trend’s direction and slope over time.

Support and Resistance

Support and resistance are price zones where prior declines and advances slowed or reversed, used in technical analysis to set entries, stops and targets.

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