Point and Figure Charts: A Trader's Complete Guide

Written by Cory Mitchell. Updated by TraderHQ Staff.

Point and Figure Charts: Filtering Noise to Find Signals

Point and Figure (P&F) charts strip away the distractions of time and minor price movements, leaving only significant price changes. The result: clearer support and resistance levels, more definitive breakout signals, and fewer false trading triggers.

Dating back to the late 1800s, P&F charts remain relevant because they solve a persistent problem—separating meaningful price action from noise.

How P&F Charts Work

Basic Structure

P&F charts use columns of X’s and O’s instead of candles or bars:

• X columns: Rising prices (demand exceeding supply)
• O columns: Falling prices (supply exceeding demand)

Each X or O represents a fixed price increment called the “box size.”

Key Differences from Time-Based Charts

The Box Size

The box size determines how much price must move before adding another X or O:

Larger box sizes filter more noise but may miss shorter-term signals. Smaller box sizes capture more moves but increase false signals.

The Reversal Method

The most common approach is the 3-box reversal:

• A new column only starts when price reverses by 3 box sizes
• This means every column contains at least 3 X’s or O’s
• The reversal requirement prevents whipsaw in choppy markets

Example (using $1 box size):

• Stock rises from $45 to $50 = 5 X’s in a column
• Stock drops to $49, then $48… no new column yet (only 2 boxes)
• Stock drops to $47 = 3-box reversal, new O column starts

Reading P&F Charts

Support and Resistance

P&F charts excel at identifying S/R levels:

Resistance: Price level where multiple X columns have stopped Support: Price level where multiple O columns have stopped

These levels appear as horizontal zones where X’s and O’s cluster, making them visually obvious.

Buy and Sell Signals

Basic Buy Signal (Double Top Breakout):

• Current X column exceeds the high of the previous X column
• Indicates buyers breaking through prior resistance
• Entry: When the breakout X is added

Basic Sell Signal (Double Bottom Breakdown):

• Current O column falls below the low of the previous O column
• Indicates sellers breaking through prior support
• Entry: When the breakdown O is added

Advanced Patterns

P&F charts have their own pattern library:

Bullish Patterns:

• Triple top breakout (stronger than double top)
• Ascending triple top
• Bullish catapult (breakout from consolidation)

Bearish Patterns:

• Triple bottom breakdown
• Descending triple bottom
• Bearish catapult

Trendlines on P&F Charts

P&F trendlines work differently:

• Bullish trendline: 45-degree line drawn from a significant O column low
• Bearish trendline: 45-degree line (135 degrees) from a significant X column high

These objective lines remove the subjectivity of connecting swing points.

Trading Strategies with P&F

Breakout Strategy

1. Identify a consolidation pattern (multiple columns near same level)
2. Draw horizontal S/R lines
3. Enter when X column breaks above resistance (buy) or O column breaks below support (sell)
4. Stop-loss: Below the breakout box for longs, above for shorts
5. Target: Measure the pattern height and project from breakout

Trendline Strategy

1. Draw 45-degree bullish trendline from significant low
2. Trade long while price remains above trendline
3. Exit when O column breaks below trendline
4. Reverse for bearish setups

Price Objective Method

P&F offers objective price targets:

Vertical Count:

• Count boxes in the first column after a reversal
• Multiply by box size and reversal amount (3 for 3-box reversal)
• Add to breakout level for upside target

Horizontal Count:

• Count columns in a consolidation pattern
• Multiply by box size and reversal amount
• Project from breakout level

P&F Chart Settings

Box Size Selection

Smaller box sizes (more sensitive):

• More signals, more columns
• Better for shorter-term trading
• Higher false signal rate

Larger box sizes (less sensitive):

• Fewer, stronger signals
• Better for position trading
• May miss earlier entries

Reversal Amount

While 3-box is standard, alternatives exist:

• 1-box reversal: Very sensitive, many signals
• 5-box reversal: Very filtered, major moves only

Start with 3-box until you understand the methodology.

Advantages and Limitations

Advantages

• Noise filtration: Minor moves don’t appear
• Clear S/R levels: Horizontal clustering is obvious
• Objective signals: Buy/sell rules are unambiguous
• Pattern clarity: Consolidations and breakouts are distinct
• No time pressure: Updates only on significant moves

Limitations

• No time element: Can’t see how long patterns took to form
• No volume: Traditional P&F ignores volume data
• Delayed signals: Waiting for 3-box reversals means later entries
• Unfamiliar: Takes time to learn to read effectively

Getting Started with P&F

Platform Access

P&F charts are available on:

• StockCharts.com (excellent P&F tools)
• TradingView
• Most professional charting platforms
• Some broker platforms (check settings)

For a comprehensive comparison of charting and analysis platforms, explore our guide to the best stock analysis websites.

Learning Progression

1. Week 1-2: Study P&F basics on historical charts
2. Week 3-4: Identify support/resistance and simple buy/sell signals
3. Month 2: Practice paper trading basic breakout strategy
4. Month 3+: Add trendlines and price objectives

Recommended Resources

Thomas Dorsey’s work on Point and Figure charting remains the definitive reference for traders wanting to master this methodology.

Key Takeaways

Point and Figure charts offer a noise-free alternative to traditional charting. Key principles:

• Box size and reversal amount determine sensitivity
• X columns = rising prices, O columns = falling prices
• Buy signals occur when X columns exceed prior X column highs
• Sell signals occur when O columns break below prior O column lows
• Support/resistance appears as horizontal clustering

P&F works best for traders who want clear, objective signals and are willing to sacrifice time information for pattern clarity.

Experiment with P&F charts on securities you already follow. Seeing how P&F signals would have performed historically builds confidence before trading them with real capital.