Construction of the Intraday Point and Figure Chart
posted under
Philosophy of Technical Analysis
by ceecabolos
We've already stated that the intraday chart was the original type used by point and figure chartists. The technique was originally used to track stock market movement. The intent was to capture and record on paper each one point move of the stocks under consideration. It was felt that accumulation (buying) and distribution (selling) could be better detected in this manner. Only whole numbers were employed. Each box was given a value of one point and each one point move in either direction was recorded. Fractions were largely ignored. When the technique was later adopted to commodity markets, the value of the box had to be adjusted to fit each different commodity market. Let's construct an intraday chart using some actual price data.
The following numbers describe 9 actual days of trading in a Swiss franc futures contract. The box size is 5 points. Therefore, every 5 point swing in either direction is plotted. We'll start with a 1 box reversal chart.
4/29 5/2 5/3 5/4 5/5 5/6 5/9 5/10 5/11
4875 4870 4870 4885 4905 4885 4950 4940 4935
4880 4860 4865 4880 4900 4900 4925 4915 4950
4860 4865 4870 4890 4905 4890 4930 4920 4945
4865 4855 4860 4885 4900 4930 4925 4905 4950
4850 4860 4865 4890 4905 4920 4930 4925 4935
4860 4855 4860 4875
4930 4925 4920 4940
4855 4860 4870 4587
4925 4935 4930 4935
4930 4925 4925 4945
4925 4930 4935 4940
4925 4930 4965
4935 4940 4960
4930 4935 4965
4940 4940 4955
Figure 11.5a is what the previously listed numbers would look like on the chart. Let's begin on the left side of the chart. First the chart is scaled to reflect a 5 point increment for every box.
Column 1: Put a dot at 4875. Because the next number4880—is higher, fill in the next box up to 4880.
Column 2: The next number is 4860. Move 1 column to the right, go down 1 box, and fill in all the o's down to 4860.
Column 3: The next number is 4865. Move 1 column to the right, move up 1 box and put an x at 4865. Stop here. So far you have only 1 x marked in column 3 because prices have only moved up 1 box. On a 1 box reversal chart, there must always be at least 2 boxes filled in each column. Notice that the next number is 4850, calling for o's down to that number. Do you go to the next column to record the column of declining o's? The answer is no because that would leave only 1 mark, the x, in column 3. Therefore, in the column with the lone x (column 3) fill in o's down to 4850.
Column 4: The next number is 4860. Move to the next column, move 1 box up, and plot in the x's up to 4860.
Column 5: The next number is 4855. Because this is a move down, go to the next column, move down a box, and fill the o at 4860. Notice on the table that this is the last price of the day. Let's do one more.
Column 6: The first number on 5/2 is 4870. So far, you only have one o in column 5. You must have at least 2 marks in each column. Therefore, fill in x's (because prices are advancing) up to 4870. But notice that the last price on the previous day is blacked out. This is to help keep track of time. By blacking in the last price each day, it's much easier to keep track of the separate days' trading.
Feel free to continue through the remainder of the chart to sharpen your understanding of the plotting process. Notice that
this chart has several columns where both x's and o's are present. This situation will only develop on the 1 point reversal chart and is caused by the necessity of having at least 2 boxes filled in each column. Some purists might argue with combining the x's and o's. Experience will show, however, that this method of plotting prices makes it much easier to follow the order of the transactions.
Figure 11.5b takes the same data from Figure 11.5a and transforms it into a 3 box reversal chart. Notice that the chart is condensed and a lot of data is lost. Figure 11.5c shows a 5 box reversal. These are the 3 reversal criteria that have traditionally been used—the 1, 3, and 5 box reversal. The 1 box reversal is generally used for very short term activity and the 3 box for the study of the intermediate trend. The 5 box reversal, because of its severe condensation, is generally used for the study of long term trends. The correct order to use is the one shown here, that is, begin with the 1 point reversal chart. The 3 and 5 box reversals can then be constructed right off the first chart. For obvious reasons, a 1 point reversal chart could not possibly be constructed from a 3 or 5 box reversal.
The following numbers describe 9 actual days of trading in a Swiss franc futures contract. The box size is 5 points. Therefore, every 5 point swing in either direction is plotted. We'll start with a 1 box reversal chart.
4/29 5/2 5/3 5/4 5/5 5/6 5/9 5/10 5/11
4875 4870 4870 4885 4905 4885 4950 4940 4935
4880 4860 4865 4880 4900 4900 4925 4915 4950
4860 4865 4870 4890 4905 4890 4930 4920 4945
4865 4855 4860 4885 4900 4930 4925 4905 4950
4850 4860 4865 4890 4905 4920 4930 4925 4935
4860 4855 4860 4875
4930 4925 4920 4940
4855 4860 4870 4587
4925 4935 4930 4935
4930 4925 4925 4945
4925 4930 4935 4940
4925 4930 4965
4935 4940 4960
4930 4935 4965
4940 4940 4955
Figure 11.5a is what the previously listed numbers would look like on the chart. Let's begin on the left side of the chart. First the chart is scaled to reflect a 5 point increment for every box.
Column 1: Put a dot at 4875. Because the next number4880—is higher, fill in the next box up to 4880.
Column 2: The next number is 4860. Move 1 column to the right, go down 1 box, and fill in all the o's down to 4860.
Column 3: The next number is 4865. Move 1 column to the right, move up 1 box and put an x at 4865. Stop here. So far you have only 1 x marked in column 3 because prices have only moved up 1 box. On a 1 box reversal chart, there must always be at least 2 boxes filled in each column. Notice that the next number is 4850, calling for o's down to that number. Do you go to the next column to record the column of declining o's? The answer is no because that would leave only 1 mark, the x, in column 3. Therefore, in the column with the lone x (column 3) fill in o's down to 4850.
Column 4: The next number is 4860. Move to the next column, move 1 box up, and plot in the x's up to 4860.
Column 5: The next number is 4855. Because this is a move down, go to the next column, move down a box, and fill the o at 4860. Notice on the table that this is the last price of the day. Let's do one more.
Column 6: The first number on 5/2 is 4870. So far, you only have one o in column 5. You must have at least 2 marks in each column. Therefore, fill in x's (because prices are advancing) up to 4870. But notice that the last price on the previous day is blacked out. This is to help keep track of time. By blacking in the last price each day, it's much easier to keep track of the separate days' trading.
Feel free to continue through the remainder of the chart to sharpen your understanding of the plotting process. Notice that
this chart has several columns where both x's and o's are present. This situation will only develop on the 1 point reversal chart and is caused by the necessity of having at least 2 boxes filled in each column. Some purists might argue with combining the x's and o's. Experience will show, however, that this method of plotting prices makes it much easier to follow the order of the transactions.
Figure 11.5b takes the same data from Figure 11.5a and transforms it into a 3 box reversal chart. Notice that the chart is condensed and a lot of data is lost. Figure 11.5c shows a 5 box reversal. These are the 3 reversal criteria that have traditionally been used—the 1, 3, and 5 box reversal. The 1 box reversal is generally used for very short term activity and the 3 box for the study of the intermediate trend. The 5 box reversal, because of its severe condensation, is generally used for the study of long term trends. The correct order to use is the one shown here, that is, begin with the 1 point reversal chart. The 3 and 5 box reversals can then be constructed right off the first chart. For obvious reasons, a 1 point reversal chart could not possibly be constructed from a 3 or 5 box reversal.
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