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Understanding Point & Figure Chart and How to Trade with it? | Edelweiss Wealth Management - YouTube
Channel: Edelweiss Wealth Management
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what is point and figure chart and how
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to trade with it
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in this video let us understand about
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noiseless point and figure chart
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also called as pnf chart we will also
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look at some patterns that can help you
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make better trade decisions
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so let us first understand how to
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calculate pnf chart
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this chart plots filtered price
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movements consisting of
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x's and o's each of them occupies a box
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with a specific box value known as box
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size
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x represents rising price and o
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indicates falling price
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x or o are plotted with the price
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movement
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in specific direction there is also a
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setting for column reversal
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after the price movement of this amount
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in opposite direction
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the column reverses generally the
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reversal amount
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is three times the box size let's
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suppose the box
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size on a chart is rupees 5 then the
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reversal amount
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is 3 times the box size which is rupees
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15.
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let's take these price movements as an
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example to construct
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a pnf chart let us start plotting price
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movements
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on the chart and assume the box size
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is 5. in this example with the box size
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of 5
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price of 401 and 403
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will not be recorded as it is under the
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value of the box size
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when the price moves to 408
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x will be plotted against the price of
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405
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similarly with the price movement of 413
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and 416
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x will be plotted against 410
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and 415 respectively but when the prices
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start decreasing
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reversal amount is three times the box
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size so
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o will be plotted only when the price
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falls by rupees 15
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from the current price level in this
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case nothing will be done for price
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movements of 408 and 403
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when the price falls to rupees 399
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three o's will be marked simultaneously
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against 410
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405 and 400 now let us understand
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pnf chart patterns these charts are
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objective
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and can be perceived differently by
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traders for recognizing the patterns
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let us see some of these patterns double
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top
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and bottom they are the easiest and
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simplest trade signals
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a double top buy signal is just a box
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break away from the preceding x column
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likewise a double bottom cell pattern
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can be spotted
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when a column of o falls below the
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previous column of os
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let us take a glance at this chart to
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get a better understanding
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these are the double top by breakout
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signals
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and these are double bottom breakouts
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similarly there are triple and quadruple
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top
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bottom patterns they work in the same
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way as
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double top and bottom pattern super
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pattern
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there are three rules to formation of a
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super pattern
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number one strong trend with at least
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10 box move after breakout signal number
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two
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a small price reversal which is not more
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than four boxes
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and number three continuation of the
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breakout
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let us look at this chart for example
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there is an example of both
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a downward trend and an upward trend
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here
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a strong upward trend is followed by a
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small pullback
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of about four boxes and later there is a
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continuation
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of upward trend and this is an example
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of downward super pattern buying or
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selling
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after a retracement like this pattern
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becomes more feasible
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in a pnf chart as the insignificant
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moves are avoided
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to summarize pnf chart is primarily
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based on price action and not time
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many traders believe that support
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resistance levels
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and breakouts are more clearly defined
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on a pnf chart
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since it filters out tiny price
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movements and is less likely of false
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breakouts
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if you liked our video like share and
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subscribe to our channel
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and for more such videos visit our
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website www.edelwise.in
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thank you
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