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New perspective on Point and Figure Charts
There is a new book on Point and Figure charting that perhaps will provide a bridge in understanding how the PnF charts work in relation to traditional line or time based charts.
Prashant Shah has published Trading the Markets the Point & Figure Way. The objective is to allow you to become a noiseless trader and achieve consistent success in markets. Mr. Shah is a prominent P&F analyst and has many Youtube seminars posted on various "noiseless" charting styles.
A couple caveats. He is from India and the examples he uses are Indian stocks. The charts that he uses are from his software program.
That being said, the examples very clearly illustrate the points that he's putting forth. The points are easily transferable to StockChart charts, for the most part. Also, he's NOT overtly pushing his software or any services. His software doesn't cover the U.S. markets. It's a wonderful text that I'd suggest it to anyone just starting to learn point and figure, and also to anyone that is conversant in the chart style.
He offers several new ideas and indicators and applies some traditional indicators to the PnF charts. I've suggested to him, through dm on Twitter, that perhaps he should contact StockCharts to see if he and they can work together to bring his methods, thoughts and style to the U.S. market. He sounded agreeable.
One of the fun chapters covers how to relate time based charts to PnF charts. He mentions some prominent patterns on time/line charts like the cup/handle and the big base break out. He mentions how difficult is can be to "scan" for some of the patterns as time often plays havoc on the scanning process. He shows how some PnF patterns equate with common line chart patterns and shows that the PnF patterns are much easier to scan for. This provides a starting point for further analysis for those who prefer to use line charts.
I note that Bruce Fraser and sometimes, Arthur Hill and Greg Schnell, have referenced point and figure charts as a good starting point for screens.
From the book sales notes>
A peek into what you will find:
• What is a Point & Figure chart and how to plot it?
• Basic and advanced price patterns with numerous chart examples, trading rules for all patterns.
• Simple and effective ways to identify trend.
• How to use P&F counts to arrive at high-probability price target.
• How to use traditional tools and indicators in P&F charts.
• High probability patterns to capture momentum stocks and sectors.
• Objective method to identify market outperformers using Relative Strength.
• A few indicators developed, by the author, exclusively for P&F charts.
• 20-years of Back-testing results of P&F patterns providing interesting market insights.
I'm just finishing up reading the book. I've been using point and figure for over a decade. I recommend the book, especially for the bridge it can provide to those more comfortable with time/line charts.