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Point and Figure Charts and Alerts

Point and Figure Charts and Alerts

Point and Figure Charts Save Traders Time, Reveal Better Trading Opportunities.Point and Figure charting is an established method used by most investment firms as a primary or secondary charting method. Originally drawn by hand, most traders now use software to create charts.

Draw by hand

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Point and Figure charts have been around for a long time. Early traders used to buy graph paper and mark an X or O as stock values changed. Floor traders in the pit would trade their own account while doing the trading for their employers, the stock brokers. These floor traders would simply keep a small notebook or piece of paper in their pocket and scribbe down an X or an O when the price moved to significant price levels.

Use an installable Point and Figure software

One way to is to use software you install on your computer. The advantage of professional Point and Figure software is you can arrange portfolios of stocks, receive instant updates, and work with multiple data feeds.The downside is it doesn’t automatically send you notifications, and there is a learning curve. Learn more about Point and Figure software.

Online Point and Figure Charts

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The fastest way to create charts is by using the PointandFigure.com platform. Most traders prefer using this to other charting software because of the simplicity and proactive notifications and features not available in an installable program or elsewhere.

Benefits of using the online point and figure charting platform PointandFigure.com:

Finding new trading opportunities

Most traders examine many stocks to verify trends and patterns before finding a good pick. Point and Figure Alerts takes a different approach: let traders search for stocks that fit Point and Figure criteria. This saves you time because you can quickly pull up a list of dozens or hundreds of stocks that fit your ideal criteria. No more scanning through dozens (or hundreds) of stocks before you find your ideal pattern and criteria. You can then take a closer look at each stock and pick the best opportunities to focus on.

Protecting against losses with automated notifications

If desired, you can get emails sent to you when your investments meet a criteria you set. For example, a bearish pattern like the Point and Figure double or triple bottom. This helps you save time and energy, because you don’t have to check in on your investments as often. More importantly, it helps you avoid closing out trades too early due to emotions like fear.

Getting new stock picks automatically via email

Similar to the potentially bearish notifications on your portfolio, you can set notifications for stocks that are about to go bullish. You can receive notifications on your portfolio, a sector, or the entire market.

Using Relative Strength charts to catch multiple waves

The Relative Strength features help you compare how your investments stack up against other stocks, sectors, and the market in general. It’s a valuable tool for top-down investment strategies because it shows you which macro trends to align your strategies with.

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Point and Figure Charting basics

Background: Point and Figure charts are popular because they help you predict market outcomes. Their effectiveness has been proven by independent researchers. A study on Point and Figure Patterns performed at Purdue University showed that using Point and Figure patterns would result in a potential trade success rate of 71-93%.

Most institutional traders refer to Point and Figure charts to get an alternate view of their portfolio.

History: Point and Figure Charts were first mentioned in 1898, but were used by traders before then. Victor Devilliers, Richard D. Wyckoff and other prominent traders made Point and Figure Charts popular through books, articles, and great trading success using the method.

Drawing Point and Figure Charts:

Point and Figure charts were originally drawn by hand, and are very simple. Rising prices are represented by an X. Falling prices are represented by an O.

The method filters out unnecessary detail and “noise”. Every price movement above or below a set increment results in a X or O in a box. 45 Degree angles are used to represent up or down trends. An X mark shows that the price went up by the fixed amount, O marks that the price went down by the same amount. When the stock changes direction from an up trend to a down trend, a new line is started.

Point and Figure Advantages and Characteristics:

-Gives you a different view of market action.-Helps you focus your attention on the most important price movements.-Is action or price-based, not time-based.-Generates useful trendlines and patterns that are clear to see.

Point and Figure Patterns:

The simplicity of Point & Figure charts makes spotting important price action and patterns easier than other chart types. Independent research has proven the effectiveness of Point and Figure signals as predictors of the market.

Point and Figure charts have very simple Buy and Sell signals that you can find in trading. These patterns indicate the exact moment of change in the underlying relationship of supply and demand in a stock. These patterns are crucial to effective trading because supply and demand determine the price of any investment. Filtering out other noise and focusing on this supply and demand relationship is what makes Point and Figure charts so useful. Spotting the right pattern makes it easy for you to confirm the nature of supply and demand before you make a trade.

More information on Point and Figure patterns

Learn more about the best Point and Figure Software options

Free Point and Figure Charts Trial and offer

Point and Figure Software

Point and Figure Software

Software designed specifically for Point and Figure can give you a huge advantage over traditional software. Unfortunately most programs only use very basic Point and Figure charting concepts. This approach misses the true potential of what automated Point and Figure software can do for you.

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Point and Figure Charting Before Software

Here we see what an earlier trader would have used to make a chart by hand. An X or O is marked every time the stock price reaches the box size threshold. The trader would then go through his charts to identify the trendlines and patterns. Need a review on Point and Figure chart basics? Click here.

Most Point and Figure Charting Software Programs

Most computer programs simply duplicate the hand-drawn charting method. This saves time over hand drawing your charts. But they don’t give a definite advantage besides that. This is because most programs are modeled after bar charts or candlestick charts. They just replaced bar charts with Point and Figure charts, without adding the features that make Point and Figure powerful.

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Point and Figure Software Designed with Advanced P&F Features

Advanced festures include:

  • Wyckoff figure charts
  • Robust and Fast search tools
  • Automated Notifications
  • Advanced P&F analysis
  • Relative Strength Tools
  • Pattern scanner

What does a software or service look like that was designed specifically for Point and Figure charting?

Here are a few of the features that really unlock the potential of Point and Figure charting:

Robust Search Functionality

In the past, most traders spent the majority of their time tracking different stocks. They charted many potential stocks and watched patterns and trends until they found the ideal trading opportunity. Many traders still operate this way. They start with a handful of stocks, look at their charts and watch them until they see a pattern forming.

Advanced Point and Figure search tools give you the ability to find a list of stocks that fit your exact investment requirements. Instead of scanning through dozens of stocks before you find your ideal pattern, you can quickly pull up a list of dozens or hundreds of stocks that fit your ideal criteria. You can then look through these stocks and pick the best opportunities to focus on.

Automated Notifications

Most traders spend too much time retracing the same steps and doing the same things every day. Setting up automatic notifications lets you stay on top of the most important developments without having to check in every day. Automated Point and Figure notifications focus on patterns as they develop. Instead of getting automated notices every time your stock hits a certain price, you can get a notification when a pattern forms. This is powerful because it allows traders to track their investments automatically. If a bearish pattern is forming, they can quickly analyze and make a move if needed. Traders can also receive notifications on potential investments.

Advanced Analysis and Indicators

New and experienced traders can benefit from Point and Figure-based indicators and analysis. It helps focus your attention on the most important movements and trends of a stock, and provides a good starting point for your research and analysis.

Wyckoff Charting Features and Advanced Charting Options

Most programs only offer limited charting features. True Point and Figure software provides Wyckoff charting and other features such as: automatic box size, manual box size, percentage scale, reversal size, time period, and automatically drawing trendlines and patterns.

Relative Strength Features

Relative Strength charting helps you compare how your investments stack up against other stocks, sectors, and the market in general. It’s a valuable tool for top-down investment strategies because it shows you which macro trends you should align your strategies with. The right software makes using Relative Strength charts easy and automatic.

Portfolios and Watchlists

A Point and Figure portfolio or watchlist can give you several advantages:

-Quickly see what pattern all of your investments/watchlists are in.-Rank your investments and watchlists by Relative Strength value.-Get automatic updates on any of your portfolios or watchlists.

Having your portfolio or watchlists in a Point and Figure-based program gives you the advantage of being able to see the most important trends and patterns all at once.

More Point and Figure Charting Articles and Resources on

Point and Figure Charts

Point and Figure Charting Basics

Point and Figure Patterns

Point and Figure Patterns

Point and Figure Patterns

Point and Figure Charts are the perfect tool for traders who want to know how strong supply and demand are for a stock. Because it records prices in ticks, the focus is on where prices are headed. The method is simple, but powerful. Part of that power is identifying Point and Figure patterns that have been proven to be very effective at predicting prices.

Most investment gurus claim to have the best investment methods or strategies. But how many of them have real science or proof behind them? Point and Figure patterns have been scientifically proven to be better predictors of the market.

A technical research study at Purdue University found that following Point and Figure trends and patterns predicted market direction with over 80% accuracy (see the charts below for more details). Knowing how to identify and trade and Point and Figure patterns has been proven to be very effective.

Below is a list of the different Point & Figure Chart patterns and their likelihood of success if used in speculation. Although each has a different likelihood of success, all patterns are preferable to not using one.

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How successful traders use Point and Figure patterns

  • Identify when a stock is turning bearish or bullish. These signals help a trader know when to get in or out of a stock.
  • Identify when a market or sector is turning bearish or bullish. A bearish market or sector often hurts even the strongest stocks in that sector. Likewise, a strengthening sector or market help lift many stocks in that sector or market.
  • Use a service like Point and Figure Alerts to find stocks with any bearish or bullish pattern, instantly. This is a big time saver. Instead of manually scanning through charts, a trader simply specifies that he wishes to see only stocks that fit a certain parameter.
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Simple Point and Figure Patterns

Double Top Breakout

One of the most basic patterns. A Double Top Breakout is formed when a high is followed by a decline, then a high which if followed by a rise that exceeds the previous high. Most Point and Figure patterns are a variation of this pattern, or its opposite, the double bottom.

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Double Bottom Breakdown

Similar to the double top breakout. A Double Bottom Breakdown is formed when a low is followed by a rise, then another decline going lower than the previous low. Again, most Point and Figure patterns are a variation of this or the Double Top.

Ready to start your own Point and Figure charts? Search for stocks based on P&F patterns?

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Chart basics

Chart basics – how the P&F charts were invented

The method of trading called point and figure is a really effective trading system for trading breakouts. In this article I will explain the basic mechanics of this trading system as it was invented. Even if you have already heard about point and figure before, I’m sure this article will give you new insights and ideas. If you haven’t ever heard of point and figure, or P&F in short, than you will get an understanding of this method, and then find out how to learn more and put it into use.

First of all – Point and figure is both a charting method and a trading system. The charts are quite different to candlestick charts or OHLC-bar charts that you are probably familiar with. And somewhat like candlestick charts, the chart itself is a complete trading system once you have learned to master the method. Candlestick trader look for particular patterns in their charts, and as you will see, so do we. But the P&F charts are much easier to start using. We will trade patterns that are found in the P&F charts, like the triple top patterns for breakouts or the reversal pattern for counter trend trading.

 

Point-and-figure-trading.jpgWhen you use candlestick charts you probably know that the price action can get very complex. Many traders therefore use various indicator on top of their charts to filter out some of the “noise”. This works for some but, as you probably realize, not for all. Luckily the point and figure charts offer a better way of filtering out the market noise, or the messy price movements, that feel like they were designed to make you place losing trades.

 

In such a noisy candlestick chart it is very difficult to find exact price points where you could have gotten into a long trade at the bottom, or where you could actually enter on the break out. In point and figure the entry signals are instead quite obvious. After reading up a little on P&F you will be able to enter your trades at exactly the same price as the true professionals, and exit your trades at exactly the same price as well.

You might be thinking that these are new type of charts. But the opposite is true. These charts with these X’s and O’s originated from a time back in the 1800s. The method was probably used on the so called curb markets earlier, but it was with the advent of the exchanges having floor traders that the method was really crafted into what it would become.

These floor traders, or pit traders, were speculating with both clients capital and their own money in the markets. They would need a way to follow the prices systematically while they were watching the intraday price go all over the place. During that time they didn’t have charts to look at during the day, so they had to either memorize important price levels, or find a quick way to make notes of the significant price action.

Many of the floor traders are still using this idea even today. While working for brokerages they will trade their own accounts as well, and as you can understand, these guys cannot sit down to watch a chart during the trading session. You have seen these guys standing in the trading pit, showing gestures with their hands, and trying to close orders for their customers. It is quite the hectic environment and not for the faint hearted.

So, these guys are on the floor trading during the entire day, and they have their own accounts that they trade at the same time. Their primary business is of course to fill orders for other brokers who gets phone calls or electronic orders from their clients and puts in the order on the trading floor. For example to go long 100 contracts if the price hits a particular point. Now at the same time they have their own trading account and what they would do is to have a little notebook or index card in his in his front left pocket and then scribble down small symbols that the significant price move, if let’s say the price moves up 25 cents or 50cents. He will not have time to write down every price change, and neither does that matter either, as it is the significant price points that are of importance to break out traders.

This is a simple method. Draw a little X when price went up another 50 cents, write another X on the on the paper as price went went up another 50 cents. And so on. And when the market came down he would write O’s in another column. A new O for each 50 cent that the market would move down. This way he is able to keep track of the direction of price going up and down.

You realize that he is not able to or does not have time to draw candlestick charts during the day, nor does he have access to a computer or possibility to go look at a terminal to look at the price chart, so he’s just simply scribbling X’s as the price goes up X’s going up and then if the market starts going down he starts drawing a column of O’s going down. This is where the point and figure system started, as these floor traders needed a really simple way to trade breakouts

As S’s went up and then the O’s came down, and then when the X’s went back up again he would be able to see a breakout. The simple hand made charts gave real clear breakout signals to trade. Today we don’t need to keep hand made records as we have online point and figure charts.

The web’s definitive Point and Figure reference

The web’s definitive Point and Figure reference

GetStartedSwingTrading

What is point and figure, and why should I care?

Point and Figure, or simply P&F, is by far one of the easiest ways for doing technical analysis of stocks, forex and commodities.

PointAndFigure.com is the definitive resource on Point and Figure online, and all the educational material you find here is free.

We are dedicated to teach this simple and profitable trading system.

We also offer a premium online charting service, that includes basic and advanced P&F tools – Online P&F Charts

Our P&F system is a complete “toolbox” for technical traders and investors

  • P&F is a complete, dynamic charting method
  • P&F is a profitable technical analysis method
  • P&F can be used on any stock, forex or commodity
  • P&F gives simple and effective trading signals
  • P&F lets you compare stocks against each other to see which one is more likely to profit
  • P&F has simple methods for protecting your capital by placing optimal stop loss orders
  • P&F has been used for more than 100 years, and is still as effective

Get started now!

To get started with our complete trading method, enter your email and sign up for our free newsletter service. We will send you the link to our private introduction video that explains the benefits of using our system. We provide tools that are not available anywhere else.

See for yourself how you can start trading profitably and confidently already today.

PFchart

The simple basics of P&F – learn in minutes

At the right you see a point and figure chart. At a first glance P&F charts might seem strange. But once you have learned the basics – which you will do now within a few minutes – you will learn to love them, and always refer to them from here on.

The foundation of point and figure charts is the drawing of figures in straight columns in a grid chart. Each row in the grid corresponds to a price level. When the price is trending upwards we will draw X’s. And when prices are trending downwards we will draw O’s.

The X’s and O’s are the “points and figures” of the method. Each X or O is simply one price point in the price scale at the left hand side. When the price moves up one point we would add and X, and when price moves down one point we would add an O.

What happens when prices move up 4 points in a day? Like for example from $125 to $129? Then we simply add 4 X’s in the chart. This is simple and logical.

This 1 point step in the price scale is what we call the “box size”. You can think of the grid chart as small boxes that are either empty, or filled with an X or O. The box needs a whole point to be completely filled, so for a box size 1 – we simply need a full $1 price increase or decrease. The point and figure analyst can decide what box size to be used. For now we just use the box size 1 – later we will learn more advanced topics like how to use different box sizes.

Prices fluctuate up and down in waves

If prices would just move up all the time everybody would be millionaires, right? However, when you look at a regular bar chart, line chart, candlestick chart you notice that prices tend to fluctuate all the time – prices move up a bit, down a bit, up again, then down and so on. In other words the prices move in waves and it seems impossible to know when the turn will come and how long it will last.

Below you see how a candlestick chart fluctuates over a few months.

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Point and Figure is simple

Point and figure has an ingenious way of handling these price fluctuations and waves. To begin with, we do not pay attention to small minor fluctuations. This simplifies the life for traders and investors considerably. In the modern world with the constant information overload that we are bombarded with, this will be If prices move a few fractions of a point up or down in a week, it does not matter in the big picture. We simply want to buy at $60 and sell at $75 – to give you a simple example. We don’t have to care too much about how prices move in fluctuations between $60.07 and $72.14. We only care about how prices moved from about 60 to about 75 on the figure chart. Simple, right?

So, how about the waves and fluctuations downwards? How about when prices move back in a down wave, from $57.14 to $55.96? The simple, straightforward answer is – we don’t really care. In our simplistic method, prices are still at around 57. Next up wave when price moves to $58.33 we just have to notice that the price moved up to 58. You as the point and figure chartist can decide when you want the price changes to be significant enough to cause a new trend column in the P&F chart. This is what we call the “reversal size”. Most frequently the reversal size 3 is used. This means that we keep on drawing new X’s until the price moves down at least 3 full points, or boxes.

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How to read a Point and Figure chart

To go through our example from the beginning of the P&F chart at the right, we are currently in the first column of X’s with the last X at 59. Now price moves down 5 full points to $54. We thus move to the next empty column, and draw 5 O’s. As we use a 3 point reversal size chart we would first draw 3 O’s. At 58, 57 and 56. And as price continues down to below 54, we draw two more O’s in the same colum. We would not draw one at 54 until price moves below $54.

Another reversal size that is sometimes used is the 1 point reversal. This means we wouldn’t wait until the price trend has reversed 3 points, but we already move into the next column after 1 point. In this example we would have drawn an O already when pice moves below $58, and continue with a new O for each price point – 57, 56, 55, 54.

After the price hit $54 it started to move up again. We got a reversal of the price that was greater than the reversal size, so we moved into the next column. The price continues to rise to $66, then has a revesal down to $60, after which it continues the uptrend all the way to $75 – and we can close our trade for a big profit.

The three charts, first the bar chart, then the line chart and finally the P&F chart, all show stock movement, but in different ways. See how the P&F chart really simplifies the charting. And one more thing – this P&F chart shows two trading patters or trading signals during the example trade from 60 to 75. The trading signals are all covered in the free webinar, and we also go through them on the site in another article.

Congratulations! You have now learned the basics of point and figure. Some of it might still be a little bit confusing. But don’t worry. You will become a true point and figure craftsman after a little practise.

Next steps…

We will continue adding more and more information and training on this site. Now you can view our free P&F webinar, and read the free P&F book that we have made available for you.

You can also head over to our Online Point and Figure charts. Because when you start learning and putting your knowledge into practise in the markets, you will need a professional point and figure charting solution. Most investors and traders use PointAndFigure.com as we offer basic and advanced P&F charts, relative strength analysis, RS matrix, P&F pattern scanner – and last but certainly not least – market timing indicators.

Our premium online charting service is found here: Online P&F Charts

Get started now!

To get started with our complete trading method, enter your email and sign up for our free newsletter service. We will send you the link to our private introduction video that explains the benefits of using our system. We provide tools that are not available anywhere else.

See for yourself how you can start trading profitably and confidently already today.

Your best email:

GetStartedSwingTrading

Online Point and Figure Charts and Scanner

Online Point and Figure Charts and Scanner

Today we’ll take a sneak peek at our online P&F charting platform. Our tools are of course much more advanced than what I am showing you in this article. Many are interested in learning more about the particulars I go through here. We will look at the point and figure charts and the P&F pattern scanner.

So in our online tool for P&F we have point & figure charts and an advanced pattern scanner. These are two fundamentals every successful P&F swing trader will need. First off I’ll go through the pattern finder. Look at the scanner results pages in the pictures. It is a very clear and powerful tool, as you can see. We have the whole set of point and figure patterns that you can scan for – everything from buy signals and double tops to triangles and other more complex patterns.

The pattern scanner instantly gives you a list that meet your criteria that you have selected. I personally often scan for the triple bottom breakout and the triple top breakout, as I have found them to work the best for my swing trading strategy. The pattern scanner is really, really quick and delivers the stocks with the P&F patterns you choose. You can also add more criteria to the search, in order to refine your search. You can pinpoint stocks that meet any criteria that you like.

We have thumbnail charts that are shown in the pattern scanner. This saves you a lot of time, as you can have a quick glance on each of the charts to see if it looks good enough for a more detailed analysis.

F_chart_thumb1P&F_chart_thumb2Point_and_figure_chart

 

This is what our point & figure charts look like. As you know the Point and figure method is not a time-related approach. It might take a single day to draw an X, or it could take a week or a month. Of course, with intraday P&F charts you could even get changes for every tick.

The nice thing about P&F charts is that if the price just stays stagnant, you will not get a lot of drawings on the chart. That kind of boring stagnant price moves, or market noise, is simply filtered out with P&F. But then all of a sudden, when price really starts to move again, you will immediately get new X’s or O’s in your chart. This is one of the best time to enter trades. You will instantly get a break out pattern on the chart, which signals you to enter your positions.

Once you click one of the symbols, you are taken to the bigger, more advanced P&F chart. In this page you have many different options to add to your charts, like automatic P&F trend lines and moving averages. You can choose to display the chart using a defined box size, a predetermined price scale, or a logarithmic price scale – the percentage price scale.

I want to point that out that these tools that I am presenting in this article are available to you online, so there is no software that needs to be installed or anything. It is available in your web browser on your PC or your Mac. It works just as well on your iPhone, iPad or Android phone or tablet.

So the beauty of our online P&F scanner is that it will provide a list of stocks that are currently breaking out through support or resistance. You can then glance through the results, and finally analyze the best charts in more detail. All within seconds or minutes.

Imagine the time savings you will have with this tool, and think about how easy it is to find winning stocks to trade!

It is now time that you take a look at the online point and figure charts platform.

Easy-to-spot

Trends, Trendlines in Point and Figure: Incredibly Easy to Spot

Point and Figure has been proven to accurately predict markets, both by traders and by independent research studies (we’ll go over this research in another article).First things first- to make money using Point and Figure you need to know how to read trendlines and patterns.Bull’s-Eye Broker can display trendlines automatically if you want. But you still need to be able to read trendlines and patterns to know what they mean and take advantage of all that Point and Figure charting has to offer. If you’re new to this don’t worry – reading trends and multiple patterns will become second nature after just a few charts.Mastering trends, trendlines and patterns will give you the ability to easily scan all your target stocks, markets or industries to identify possible trends.

Trends and Trendlines

Point and Figure short term trends are shown as columns of X’s for uptrends or columns of O’s for a downtrend.If a trend continues over multiple columns, the trend line is drawn as continuous dashed lines.For example, below you can see two dashed trend lines. The first is an uptrend. The second is a downtrend.

The Point and Figure method tells us that if the market is in an uptrend there is a high probability that the uptrend will continue until the weight of evidence suggests that it has been reversed.

If a stock or any market is in a downtrend it will most probably continue until we can collect enough evidence to suggest that the downtrend is over and a new uptrend has begun.

The trend reversal is clearly depicted in Point and Figure charts. Unlike other methods where you need to use your judgement in order to determine if there has been a trend reversal, in Point and Figure you immediately see that the figures have turned from X’s (uptrend) to O’s (downtrend) or vice versa.

This Point and Figure principle has held true for more than 100 years. Identifying these trends is the first step in chart reading or technical analysis. Luckily, this process is extremely easy with Point and Figure charts.

Trends in stocks, forex, futures or any other security are caused by the forces of supply and demand: prices rise when demand is greater than the supply, and likewise fall when supply is greater than demand.

How to identify Trends

Trendlines are important tools in technical analysis for trend identification and trend confirmation, as well as identifying when a definite trend reversal has taken place. Trendlines are also used to measure the bullishness or bearishness of a stock. The steeper the trend line, the more bullish or bearish it is.

In standard Technical Analysis a trendline is drawn as a straight line which connects two or more price points and then extends into the future to act as a line of support and resistance.

Standard Technical Analysis UP TRENDLINE at the right. The stock price touches the trend line at points 1, 2 and 3 and continue the trend upwards.

An up trendline has a positive slope and is formed by connecting two or more low points as shown in the above chart. The second low must be higher than the first for the line to have a positive slope. Up trendlines suggest that demand is increasing as prices rise. Up trendlines also act as areas of support. As long as prices remain above the trendline the trend should be assumed to continue up. Only a breakdown of prices below the trendline indicates that demand has weakened and a change in trend could be imminent.

 

Standard Technical Analysis DOWN TRENDLINE at the right. The stock price touches the trend line at points 1 and 2, and then continue the trend downwards. At the end of the chart we can anticipate that the stock price will touch the trendline one more time.

 

A down trendline has a negative slope and is formed by connecting two or more high points as shown in the above chart. The second high must be lower than the first for the line to have a negative slope. Downtrend lines suggest that demand is decreasing, and supply is becoming greater than demand. Down trendlines also act as area of resistance. As long as prices remain below the trendline the trend should be assumed to continue down. Only an upside of prices above the trendline indicates that demand is strengthening and a change in trend could take place.

Point and Figure Trends:

As you already know, Point and Figure charts are made up of columns of X’s and O’s. By definition, a column of X’s is an uptrend in the short term. As prices go higher you add X’s to the column. A series of X’s on top of each other is an uptrend. Once the prices reverse and you move into the next column and start adding O’s you have a downtrend.

You can immediately tell if the stock is in a bullish uptrend or a bearish downtrend, just by looking at the latest figure – is it an X or an O? It doesn’t get any simpler than that.

In a standard Technical Analysis chart you can’t tell if the next few bars is an uptrend or a downtrend – they could simply be erratic “inside bars” or even a quick counter trend in a short term trend. All of this can be very confusing, especially to a new trader or one that is not experienced in reading charts. With Point and Figure you can avoid this confusion entirely. Point and Figure filters out insignificant price moves. New figures are not added at all unless the price move is significant enough to get a new X or O.

 

Point and Figure trendlines:

Traditional Technical Analysis Trendlines are a powerful tool for traders, but are often hard to use in practice. It is easy to do it in theory and add a trendline to a historical chart. But drawing trendlines in a real-time situation, or on a current chart can be confusing.

Point and Figure is much easier to draw trendlines with. Because they’re so easy to find, you don’t have to work to find them. In point and Figure all trendlines are drawn diagonally in 45 degrees, or negative 45 degrees (“135 degrees”). When using Bull’s-Eye Broker you just point and click where you want to add a trendline.

Point and Figure trendlines are usually drawn at the time of the first point and figure pattern in a chart. (we’ll go over Point and Figure patterns in detail in another series of articles).

When there’s a bullish entry signal you simply add the trend line at the bottom of the column. When there’s a bearish entry pattern you add the trendline at the top of the column.

The real beauty of Point and Figure trendlines is that they stretch into the future, without having to connect the trendlines to “higher highs” or “lower lows”. You only need one point in the chart to have a powerful trendline that will help you stay with a trend and make money.

You can also add trendlines wherever you want in the chart. This is perfect for identifying and following up short term trends as well as long term trends.

With Bull’s-Eye Broker P&F software you even get fully automatic trendlines – you can let program decide where to add the trendlines based on defined rules resulting from research. Just click the option for automatic trend lines and Bull’s-Eye Broker will identify the trends for you.

 

CONCLUSION:

Identifying trends is the first step in technical analysis and key to making successful trades. The Point and Figure method makes this step completely automatic. These trends help us predict where stock prices will go with a high degree of accuracy.

Standard Technical Analysis and Point and Figure trendlines can be used together to increase confidence in your trades.

These tools are also used to detect trend reversals. Trendlines and formations on the Point and Figure chart can also be used as key support and resistance points. These tools are a must in reading charts and applying technical analysis successfully.

The benefit of having automatically drawn trend lines is huge. You do not have to rely on judgement – the trend lines are drawn automatically at the right places – proven through years of research and experience. The best way to start profiting from Point and Figure Trend Lines is to use specialized P&F software Bull’s-Eye Broker.

Swing trading vs. day trading

Swing trading vs. day trading

 

There are a lot of rules and guidelines you have to learn in order to start implementing profitable swing trading. But once you’ve had a chance to digest these, you can start looking at different swing trading strategies. Once you master a strategy you will know how to make successful trades.

 

We’re going to talk first about what swing trading is. A lot of people mix it up and confuse investing, swing trading and day trading. Wikipedia has a definition of swing trading:

“A speculative trading activity in any financial market whereby instruments such as currencies are bought and sold in an effort to profit from price changes or ‘swings’.”

 

This is exactly what swing trading is. But that definition could also be for day trading. It’s all about trading. It is not buying and holding on to a stock or other instrument passively for an indefinite period of time.

 

I call swing trading semi-active. The swing trader will have a general picture about where the stock is trading at any given time. He or she will also have a general idea about where it will go. Typically a swing trader will hold a position for a few days to a few weeks, or even a few months. I call it semi-active to distinguish between the very active day trader. In swing trading you can both go long and short. There is no need to stop trading during bear markets. Although, some people are reluctant to trade on the short side.

 

In day trading the trader will open and close any number of trades during one day. When the stock market closes he will be completely out of the market. The next day when the market opens, he will start trading again. A day trader enters very short term trades, from a few ticks, seconds, minutes or hours. But he will be completely out of the market as the trading day ends. Of course, there are day traders who hold positions overnight from time to time. Generally, this is avoided due to the overnight risk. The trader will generally prefer to open and close all trades during the day.

 

Identifying the best time to enter is the primary challenge in all trading strategies. Also, finding the optimal price level where to close out trades is equally important. Knowing where to place stop loss orders can also make or break your success in trading.

 

We focus on point and figure for swing trading. P&F is a great, simple trading system that continues to prove itself over and over again. By using P&F we can find unambiguous trade signals effortlessly. We can use it for both entering and exiting positions. And there are simple P&F methods to find the optimal price levels for placing stop loss orders, to minimize the risk. This method is available in a simple but powerful online P&F charting platform. In addition to P&F, this platform also gives you a ranking tool that finds the best stocks, as well as a market timing signal that tells you when the market is bullish and when the market is bearish. It also tells you how strong the bull or bear market is. This lets you be more or less aggressive in your trading. You can maximize your result, and minimize your risk, all using one simple P&F tool.

Basics of swing trading

Basics of swing trading

Many traders for some reason think that swing trading is very similar to day trading. But day trading is actually a lot more complicated, it requires a lot more time, and a lot more effort. Day trading requires you to sit at your computer all day long watching the markets. Swing trading is a lot more relaxed and done a lot more leisurely. It is less intense and generally has less capital requirements than day trading.

Swing trading is different from day trading. When swing traders trade, they leave their trades running for more than one day or even a month or more. Swing trading is a short to interim term trend-following trading technique. It is involving trends only, and it’s the swings of the markets that are referred to in the term Swing Trading.

Generally swing traders look for minor trend reversals to enter trades in the direction of the main trend.

For example in a main uptrend swing traders will enter on the minor pullback. This is done in anticipation that the price will continue back to the uptrend. In other words and they buy on dips or they sell on Peaks.

A swing trader take advantage of the “ease” in the market, when the buyers in an uptrend – the institutions, the “big money” – just take a breath and let the price ease down a little bit.

As a swing trader you would enter the market at that bottom of the pullback – when the price is going down in a uptrend. At some point the sellers get exhausted. They get tired out and they take a breath. And that is when the price will recover, and continue its uptrend. A swing trader trading a down trend would enter, when it peaked up to take advantage of that little movement against the trend.

Successful swing traders are anticipating that the asset, whether it’s a stock or currency, will continue overall for the next day or week in the same direction in which it’s been going. So when it peaks and starts to go down, they know it’s going to go back to a price level where it was trading earlier, and they’ll buy it there.

Successful traders watch how the price in a strong uptrend reverses for a short while. With Point and Figure, traders can easily see these as reversal patterns in the P&F charts. Often, in a very strong up trend, the price will reverse for a few price points, and then continue its uptrend. The P&F reversal is the best time to enter trades in an uptrend. The picture illustrates this simple Point and Figure pattern. The trader will enter here, and then let it run. Let it continue its uptrend. The risk is minimized by placing a stop loss below the lowest O. That is how to make money swing trading.

To start using the best swing trading system available to traders, please visit our online charting platform. 

We have tools for finding the strongest stocks with the best uptrends.

Top-Down Method Basics

Top-Down Method Basics

We will now look at a method that you could use in real successful swing trading. This is a method that is used all over Wall Street and among many successful swing traders.

In order to determine if the market is bullish or bearish you will need a systematic approach. You will also need a systematic way to determine how strong the bull market is or how weak a bear market is.

After you have determined the outlook of the market you should find the best sectors to trade in, and finally identify the best stocks and pinpoint when to open your trades. This process is called top-down analysis. You move from the top to the bottom. Market, sector and stock.

This article is based on our online Point and Figure Chart solution. We offer all the tools you need to succeed with top-down analysis. We have a unique approach to finding the best stocks to trade. This means we first look at the market, then at the market sectors, and finally at individual stocks in the sectors. And the idea is that if the market goes up we want to find sectors that go up, and then concentrate on stocks in those sectors. And vice versa in falling markets, look for weak sectors, and concentrate our short selling of stocks in those weak sectors.

Top down analysis makes sense. Usually when a trading strategy makes sense it also works well. A rising tide lifts all boats. If the market is rising, that means most stocks will also rise. If the market is falling, that means that most sectors and stocks will fall. The same idea is also present in each of the sectors – if the sector is trending upward or downwards this means that a majority of stocks in that sector also rise and fall together with it.

There will always be some crazy stock that goes completely against everything else, but if you try to find those and trade those you will probably not be very successful. For most of us the key to successful trading is to easily identify trades that are likely to move in your favor. The great majority of stocks will move together in tandem with their sector. And the sectors will move together with the market as a whole. The easiest way to find great trades is to identify the low hanging fruits. To identify the stocks that move with their sector and with the market.

This is an approach that all the big players in the market use. From JP Morgan and the likes, to professional and individual traders. It has been used successfully for probably a century already. I personally found this method when completing a stock market training course that was created in 1933. I have then refined the method over the years, and finally developed a tool that I use every day in my own trading at a US proprietary trading firm. Now this tool is available to you also.

Once we have determined the market outlook, we will go on to find the strongest or weakest sector, and finally find the strongest stocks in that strongest sector. Or find the weakest stocks in the weakest sector. Depending on if the market is bullish or bearish.

In a bullish market we will only trade long positions, i.e. buy stocks. In a bearish market on the other hand we will want to sell stocks short. We always want to buy stocks in strong sectors, or sell stocks short that are in weak sectors.

Out of those stocks that we find in our analysis, we will finally select those stocks that are in a break out pattern with high likelihood of a profitable trade. Here is where the point and figure method comes in. Point and Figure offer high probability trading signals that are perfect for our trading strategy.

Point and Figure method will also show you where to place your stop loss orders, and provides ideas on when to take profits.

So this is what the general process for profitable swing trading looks like. It is very simple and makes perfect sense. Now you can access the simple tools that allow us to do this analysis quickly and easily. We have the online point and figure charts platform where we log in and right on the first page we see the market outlook, then we can move to find the strongest sectors and finally identify the strongest stocks. Out of those stocks we can immediately scan for trading signals. You could also stop and only trade the sectors, using ETF’s. There are many traders who trade sector ETF’s or options on those sectors. Our tools also provides trading signals for ETF’s.

That is how easy and simple this top-down method is done with the right tools. It takes a few seconds to see the market direction and outlook, and another second to find the best sectors, and then find the stocks in that sector. This entire process takes one minute at a maximum. You can then spend some more time on analyzing the charts and you will be able to pick the very best stocks to trade. You can trade these stocks comfortably and confidently.

Get your free trial of our Point and Figure charts and Top-Down analysis platform now!