Point and figure could be a charting technique utilized in technical analysis, accustomed attempt to predict monetary market prices. Point and figure or P&F charting is exclusive therein it doesn’t plot price against time as all alternative techniques do. Instead it plots price against changes in direction by plotting a column of Xs because the price rises and a column of Os because the price falls. This shows Nifty P&F chart updated every day at night.
Nifty P&F Chart – Updated End Of Day
Chart courtesy: www.stockcharts.com
How To Trade Nifty P&F Chart?
Point & Figure charts accommodates columns of X’s and O’s that represent filtered price movements over time. Their distinctive look is also alien initially to people that are additional acquainted with ancient price bar charts however once folks learn the fundamentals of P&F charts they sometimes become hooked.
There are many blessings to use P&F charts rather than the additional ancient bar or candle charts, P&F charts mechanically.
- Eliminate the insignificant price movements that usually build bar charts seem ‘noisy’
- Take away the customarily dishonorable effects of your time from the analysis method
- Build recognizing support/resistance levels a lot of easier
- build trend line recognition a child’s play
- Assist you keep targeted on the vital semipermanent price developments
After concisely discussing the history of P&F charting, we’ll mention the way to construct a P&F chart by hand. Then we’ll discuss the way to interpret the foremost common P&F chart formations.
History of point and figure charting
Point & Figure chart analysis has been widespread for a really lasting. a part of its original attractiveness was that it absolutely was terribly straightforward for somebody to take care of an oversized assortment of P&F charts back within the days before computers. In but an hour, using simply a pencil, a newspaper and a few graph paper, P&F chartists were able to update and analyze fifty or additional charts a day. once computers arrived, they created it a lot of easier to make bar charts and P&F charts began to fade in quality. Recently but, as investors seek for higher ways in which to pick out stocks, point & Figure charting has been ‘rediscovered’ and is once more growing in quality.
This classic paper and pencil-based technique was mostly overlooked as technology created charting easier, and charts became flashier. currently StockCharts.com has reintroduced the purpose & Figure chart, adding a dynamic interface that provides you management of the variables.
Creating a Nifty P&F Chart
On a P&F chart price movements are being combined into either a rising column of X’s or a falling column of O’s. If you’re acquainted with customary chart analysis, you’ll be able to think about every column as representing either an uptrend or a downtrend. every X or O occupies what’s known as a box on the chart. every chart encompasses a setting known as the Box Size that’s the number that a stock must move on top of the highest of the present column of X’s (or below the lowest of the present column of O’s) before another X (or O) is additional thereto column. every chart encompasses a second setting known as the Reversal quantity that determines the number that a stock must move within the other way (down if we have a tendency to are in a very rising column of X’s, up for a column of O’s) before a reversal happens. Whenever this reversal threshold is crossed, a brand new column is started right next to the previous one, solely moving in the other direction.
It sounds way more complicated than it’s, trust me!
In a brief, as long as a stock is in an uptrend and it doesn’t move down over the ‘reversal distance’ (i.e., the box size increased by the reversal amount), the P&F chart can show a growing column of X’s. Similarly, a stock in a very downtrend can cause a declivitous column of O’s to seem. only the stock changes direction by over the reversal distance can a brand new column be additional to the chart.
Traditionally, the box size is ready to one and therefore the reversal quantity is three (however, see below for the gory details).
It is vital to recollect that a P&F Box doesn’t represent one worth. Instead, it represents a variety of values that’s up to the box size. the quantity on the vertical axis represents the worth of the “floor” of the box. The “ceiling” of the box is up to the ground + the box size. If costs move anyplace within that vary of values, the box is stuffed in with associate degree “X” or and “O” (keep reading for details).
At the foremost basic level, there are four things to appear for:
- Support levels
- Resistance levels
- Upward trend lines
- Downward trend lines