Point & Figure

P&F charts ignore time completely and only plot when price moves by the box size. The x-axis shows column progression, not dates. This is by design - P&F focuses purely on significant price movements, creating clearer patterns.

For FTSE 100 swing trading, 20-50 points is typical with 3-box reversal. Smaller boxes (15-25) for active trading, larger (40-60) for position trading. Alternatively, use ATR-based: ATR(14)×0.5 adapts to volatility.

X columns show rising prices (buyers in control, demand exceeding supply). O columns show falling prices (sellers in control, supply exceeding demand). A column only changes when price reverses by the reversal amount.

Since P&F ignores time, patterns may take days, weeks, or months to form depending on how quickly price moves. Wide consolidation patterns can take months. The key is price movement, not calendar time.

Use P&F for signals, but place orders at actual market prices. Box edges are rounded levels for charting purposes. Check the actual bid/ask spread before entering any order.

Triple Top Breakouts are generally more reliable because the level has been tested more times, making the eventual breakout more significant. Backtesting typically shows triple patterns have 5-10% higher win rates than double patterns.

Horizontal Count: Target = Breakout + (Pattern Width in Columns × Box Size × Reversal Amount). Vertical Count: Target = First Reversal Level + (Column Height × Box Size). Use both and look for confluence.

45-degree lines are objective trend lines. Bullish Support rises at 45° from the lowest O; Bearish Resistance falls at 45° from the highest X. They serve as trailing stops and trend change signals when broken.

3-box reversal is standard and best for swing/position trading - it filters noise. 1-box (high-low method) is more sensitive and shows more columns, useful for active traders or detailed analysis. 5-box is very filtered for major trends only.

Score each signal (pattern type, width, tests, volume). Allocate larger positions to higher scores. Check correlation - avoid multiple positions with same sector/direction. Track aggregate exposure by direction.

A Fulcrum is an extended base formation with many columns (often 10+), multiple tests of support, and gradual signs of accumulation (higher lows). A double bottom is just two O columns reaching the same level. Fulcrums signal major trend changes; double bottoms are shorter-term.

Use daily OHLC to construct accurate P&F charts. Ensure signals are identified only when the completing box forms (no lookahead). Account for execution at realistic prices with slippage. Walk-forward validate to confirm robustness.

Use P&F breakouts for directional plays. Set spread widths based on calculated targets. Use pattern support/resistance for strike selection. Close options on opposite P&F signals. The objective nature of P&F complements systematic options trading.

P&F fails in: (1) Extended choppy markets (many false breakouts), (2) Very low volatility (few boxes form), (3) Gap-heavy markets (distorts box construction). Using proper box sizing for current volatility helps.

Horizontal Count is best after consolidation patterns (measures accumulated energy in the base). Vertical Count is best for impulse moves and catapults (measures the power of the initial thrust). Use both; confluence adds confidence.