Section 4 – Chart Pattern Analysis
Chapter 4 – Point & Figure Patterns
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Identify complex point-and-figure chart
patterns
Agenda Calculate price projections using vertical
and horizontal counts
Summarize additional uses for point-
and-figure charts
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Basics of Point & Figure Patterns
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Point & Figure (P&F) Charts
1. Overview
• A Point & Figure (P&F) chart is a price action-based charting technique that filters out insignificant
price movements (noise) and focuses on trends.
• Unlike candlestick or bar charts, P&F ignores time and only reacts to price changes.
2. Construction of P&F Charts
✅ X Columns (Rising Prices) → Represent upward price movements (bullish).
✅ O Columns (Falling Prices) → Represent downward price movements (bearish).
✅ Box Size → The minimum price change required to add a new X or O.
✅ Reversal Size → The price move required to shift from an X column to an O column (or vice versa).
Common values: 1-box, 3-box, or 5-box reversal.
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Point & Figure (P&F) Charts
3. Basic P&F Rules
• A new X is added when price moves up by at least 1 box size.
• A new O is added when price moves down by at least 1 box size.
• A reversal occurs only when price moves opposite by at least the reversal size.
• No new entries are made unless price moves significantly in either direction.
4. Trend Identification
Bullish Signal → When a column of Xs exceeds the previous high.
Bearish Signal → When a column of Os falls below the previous low.
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Point & Figure (P&F) Charts
5. Common P&F Chart Settings
• Traditional Box Size: 1% of stock price or fixed amounts (e.g., $1 per box).
• ATR-Based Box Size: Uses Average True Range (ATR) for dynamic sizing.
• Reversal Sizes:
o 1-box reversal: No filtering, very noisy.
o 3-box reversal: Most common, filters out minor price movements.
o 5-box reversal: For long-term trends, removes more noise.
6. Support & Resistance in P&F Charts
• Horizontal clusters of Xs or Os act as strong support/resistance zones.
• Breakouts above/below these zones confirm strong trends.
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Point & Figure (P&F) Charts
7. Common P&F Patterns
🔹 Double Top Breakout → A bullish signal where a new X column surpasses the previous
X high.
🔹 Double Bottom Breakdown → A bearish signal where a new O column drops below
the previous O low.
🔹 Triple Top & Bottom → Stronger versions of the above.
🔹 Bullish/Bearish Catapult → A consolidation pattern followed by a breakout.
🔹 Bullish/Bearish Triangle → Indicates potential breakout in either direction.
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Point & Figure (P&F) Charts
8. Advantages of P&F Charts
Removes noise → Focuses only on significant price moves.
Easy to spot trends → No time-based distractions.
Strong support/resistance levels → Clearly defined breakouts.
Good for long-term investors & traders → Filters out small fluctuations.
9. Limitations of P&F Charts
Not useful for short-term trading due to lack of time element.
May lag during rapid market movements since reversals require significant price change.
Different settings can give different results (box size & reversal size impact signals).
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Point & Figure (P&F) Charts
10. Best Uses of P&F Charts
📌 Trend Trading: Identifying long-term bullish or bearish trends.
📌 Breakout Confirmation: Verifying strong breakouts and avoiding fake outs.
📌 Support/Resistance Analysis: Clearly defines price levels.
📌 Position Sizing & Risk Management: Helps set stop-loss levels.
Quick P&F Settings Guide
Asset Type Box Size Reversal Size
Stocks (Daily) 1% of price or $1 3-box reversal
Forex 20-50 pips 3-box reversal
Cryptos 2-5% of price 3-box reversal
Commodities ATR-based or fixed 3-box or 5-box reversal
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Triangle Chart Patterns in
Point & Figure (P&F) Trading
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Triangle Chart Patterns
Key Takeaways
• Triangle patterns indicate price compression and potential breakouts.
• They can form as ascending, descending, or symmetrical triangles.
• Breakouts provide strong directional signals but require confirmation.
• A failed breakout can lead to a reversal or trap traders.
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Triangle Chart Patterns
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Triangle Chart Patterns
Pattern Interpretation Trading Strategy
Higher lows with resistance at Buy after breakout above
Ascending Triangle a fixed level; bullish breakout resistance with volume
likely. confirmation.
Lower highs with support at a
Sell after breakdown below
Descending Triangle fixed level; bearish breakout
support with confirmation.
likely.
Converging highs and lows; Trade in the breakout
Symmetrical Triangle breakout can go in either direction, setting stop-loss
direction. inside the pattern.
Price briefly breaks out but Avoid early entries; wait for
False Breakout
reverses inside the pattern. confirmation.
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Trend line Breakout in
Point & Figure (P&F) Trading
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Trend line Breakout
Key Takeaways
✅ Trendline breakouts signal a shift in market direction—either a bullish or
bearish breakout.
✅ The breakout must be confirmed by price action (at least 3 Xs or Os
beyond the trendline).
✅ Trendlines in P&F charts are diagonal and provide clear support and
resistance levels.
✅ Works well for both continuation and reversal trades.
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Trend line Breakout
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Trend line Breakout
Pattern Interpretation Trading Strategy
Price breaks above a long- Buy once breakout is
Bullish Trendline Breakout
term downtrend line. confirmed with 3 Xs.
Price falls below an upward Sell after breakdown
Bearish Trendline Breakdown
trendline. confirmation with 3 Os.
Price pulls back to the Enter on the successful retest
Retest of Broken Trendline
trendline before continuing. for stronger confirmation.
Price breaks out but reverses Avoid early entries; wait for
False Breakout
back inside. confirmation.
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Signal Reverse Patterns in
Point & Figure (P&F) Trading
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Signal Reverse Patterns in Point & Figure (P&F) Trading
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Signal Reverse Patterns in Point & Figure (P&F) Trading
Key Takeaways
✅ Signal Reverse Patterns indicate a sudden change in market
direction.
✅ They often appear after a strong trend, signaling a possible
reversal.
✅ These patterns trap traders who expect continuation but get
caught on the wrong side.
✅ Confirmation with at least 3 Xs (bullish reversal) or 3 Os (bearish
reversal) is crucial.
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Point & Figure Price Projection
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Vertical Count Price Projection Point & Figure Charts
📌 Key Facts on Vertical Count Price Projection
1. What is the Vertical Count Method?
• A trend-based price projection technique in P&F charting.
• Used to estimate potential price targets based on the size of the initial move in a new trend.
• Helps determine how far a trend may extend after a breakout.
2. Key Components
• Column of Xs or Os: The first strong move in a trend.
• Box Size: The price movement required to form each X or O.
• Reversal Factor: The setting for how many boxes constitute a column reversal (typically 3).
• Breakout Level: The price at which the pattern confirms a breakout.
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Vertical Count Price Projection Point & Figure Charts
📌 Key Facts on Vertical Count Price Projection
3. Vertical Count Projection Formula
• Bullish Target: Add projection to breakout level.
• Bearish Target: Subtract projection from breakout level.
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Vertical Count Price Projection Point & Figure Charts
4. Steps to Calculate Vertical Count Projection
✅ For a Bullish Target:
1. Identify the first column of Xs that starts a new uptrend.
2. Count the number of Xs in this column.
3. Multiply by Box Size and Reversal Factor.
4. Add the result to the breakout price (where the price exceeded prior resistance).
✅ For a Bearish Target:
1. Identify the first column of Os in a new downtrend.
2. Count the number of Os in this column.
3. Multiply by Box Size and Reversal Factor.
4. Subtract the result from the breakdown price (where price fell below prior support).
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Vertical Count Price Projection Point & Figure Charts
🔹 Formula Breakdown
Component Description
Box Count Total number of Xs or Os in the initial column of the trend
Box Size The price change represented by one X or O
Reversal Factor The number of boxes required to reverse a trend (usually 3)
Breakout Level The price level confirming the trend direction
🔹 Example Calculation (Bullish Trend)
Box Size: $2
Reversal Factor: 3
Column Count: 10 Xs
Breakout Level: $50
Price Target Calculation:
50+(10×2×3)=50+60=$110
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Vertical Count Price Projection Point & Figure Charts
🔹 Example Calculation (Bullish 🔹 Example Calculation
Trend) (Bearish Trend)
Box Size: $2 Box Size: $1
Reversal Factor: 3 Reversal Factor: 3
Column Count: 10 Xs Column Count: 8 Os
Breakout Level: $50 Breakdown Level: $40
Price Target Calculation: Price Target Calculation:
50+(10×2×3)=50+60=$110 40−(8×1×3)=40−24=$16
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Vertical Count Price Projection Point & Figure Charts
⚡ Key Takeaways & Pro Tips
✔ The longer the initial column, the bigger the price projection.
✔ Works best in strong trends with clear breakouts.
✔ Confirm projections with support, resistance, and volume analysis.
✔ Use larger box sizes for long-term projections and smaller for short-term.
✔ Always check multiple timeframes for confluence.
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Horizontal Count Price Projection
Point & Figure (P&F) Trading
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Horizontal Count Price Projection Point & Figure Charts
1. What is the Horizontal Count Method?
• A range-based price projection technique in P&F charting.
• Used to estimate potential price targets based on the width of a consolidation or base
before a breakout.
• Helps determine how far price might move after breaking out of a trading range.
2. Key Components
• Base Formation: The sideways consolidation before a breakout.
• Column Count: The total number of columns in the base.
• Box Size: The price movement required to form each X or O.
• Breakout Level: The price level at which the breakout is confirmed.
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Horizontal Count Price Projection Point & Figure Charts
3. Horizontal Count Projection Formula
• Bullish Target: Add projection to the breakout level.
• Bearish Target: Subtract projection from the breakdown level.
4. Steps to Calculate Horizontal Count Projection
✅ For a Bullish Target:
1. Identify a sideways consolidation (trading range) before the breakout.
2. Count the number of columns in the base (from leftmost to rightmost).
3. Multiply by Box Size.
4. Add the result to the breakout price (the price that confirms an upward breakout).
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Horizontal Count Price Projection Point & Figure Charts
4. Steps to Calculate Horizontal Count Projection
✅ For a Bearish Target:
[Link] a sideways base before a downward breakout.
[Link] the number of columns in the base.
[Link] by Box Size.
[Link] the result from the breakdown price (the price that confirms a
downward breakout).
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Horizontal Count Price Projection Point & Figure Charts
🔹 Formula Breakdown
Component Description
Column Count Number of columns in the consolidation base
Box Size The price change represented by one X or O
Breakout Level The price level confirming the breakout
Projection Method Add for bullish, subtract for bearish
⚡ Key Takeaways & Pro Tips
✔ Best used for breakouts from a trading range or accumulation/distribution zone.
✔ Larger bases result in larger price projections.
✔ Horizontal count targets work best when confirmed by trendlines and volume analysis.
✔ Check multiple timeframes to validate projections.
✔ Use stop-loss levels near the breakout point to manage risk.
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Next Section 5 – Technical Indicators
Chapter 1 – Moving Averages
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