what does a point and figure p f chart tell you 
point and figure charts often provide technical analysts with different trade and trend signals relative to traditional candlestick or bar charts while some analysts rely more heavily on the point and figure charts others use these charts to confirm signals provided by traditional charts in an effort to avoid false breakouts the key to point and figure charting is the box size or the amount of price movement that determines whether a new x or o is added to the chart for example say the box size is 3 if the last x happened at a price of 15 a new one is added to the current column of x s when the price rises to 18 notably the line of x s continues in the same column provided that the price continues to rise and doesn t breach a predetermined reversal amount at which point a new column of o s begins the same is true for a column of o s in a declining market the column continues until the stock reaches the reversal amount at which point a new column of x s begins a reversal occurs when the price is no longer moving enough to put another x or o in the current x or o column and then the price moves at least three box sizes if this is the chosen reversal amount in the opposite direction when a reversal occurs several x s or o s will be drawn at the same time for example following a price rise or column of x s if a reversal occurs and the reversal amount is three box sizes when the reversal occurs three o s will be drawn starting one spot below the highest x traders utilize p f charts in similar ways to other charts traders still watch for support and resistance levels breakouts can signal major trend changes depending on the box size the columns themselves can represent significant trends and when the column changes from o to x or x to o that may signal a significant trend reversal or pullback point and figure analystscharles dow the founder of the wall street journal is credited with developing point and figure charting as a way to determine imbalances between supply and demand 1 one of the foremost technical analysts specializing in point and figure charting is tom dorsey who founded the research firm dorsey wright associates in 1987 he authored several books on the topic including point figure charting the essential application for forecasting and tracking market prices nasdaq purchased dorsey wright associates in 2015 2 dorsey helped to popularize the use of point and figure charts with more traditional technical indicators such as moving averages relative strength and advance decline lines the difference between point and figure p f and renko chartsrenko charts are also based on box size and when the price moves by the box size it creates an up or down brick that moves at a 45 degree angle to the prior brick renko charts never have bricks next to each other therefore a reversal occurs if the price moves in the opposite direction by two box amounts the main difference between the chart types is the look p f charts are side by side columns of x s and o s while a renko chart is created by a series of boxes spread out over time at 45 degree angles limitations of using point and figure p f chartsp f charts can be slow to react to price changes a breakout for example must move the box amount in order to signal a breakout occurred this may benefit some traders as it may reduce false breakout signals but the price has already moved the box amount or more beyond the breakout point for some traders getting the signal after the price has already moved that much may not be effective also while p f charts may help reduce the number of false breakouts false breakouts still occur what appears to be a breakout may still be reversed a short time later p f charts are good at keeping traders in strong trends as a lot of small counter trend movements are filtered out yet when a reversal occurs it can significantly erase profits or result in big losses because the reversal amount is typically so large if a trader is only using p f charts they won t see the reversal until the price has moved significantly against them 