Point and Figure Charting: A Practical Beginner Guide
Point and figure charting plots price movement only and ignores time: a column of Xs while price rises, a column of Os while it falls. A new column starts only when price reverses by a set amount, so a week of small sideways moves may add nothing at all. The chart records price change of a defined size, not the passage of days, which is what strips out most of the noise ordinary charts carry.
That one design choice makes support and resistance easier to see, and makes signals slower and rarer. Both are the point.
What follows: how the grid is built, a worked example from Rs 500, the settings that control everything, how a price target is calculated, and where the method is a poor fit.
How the chart is built
Columns of X and O
The vertical axis is price, divided into equal boxes. The horizontal axis is a sequence of columns, no dates attached.
While price rises you stack Xs in one column. When it turns and falls far enough, you move one column right and plot Os downward. The chart is alternating X and O columns, each an uninterrupted move, whether it took days or months.
Box size
The minimum price change recorded. Set it at Rs 10 on a Rs 500 stock and every Rs 10 step is one box. Smaller moves are ignored.
Small boxes give a busier chart with earlier signals and more false ones; large boxes give fewer, cleaner, later signals. A percentage box keeps sensitivity constant as price changes.
Reversal amount
How many boxes price must move against the current column before a new one starts. The classic setting is 3, so with Rs 10 boxes price must fall Rs 30 from the top of the X column before any O appears.
Worked example: plotting a stock from Rs 500
Use a box size of Rs 10, or 2% of Rs 500, with a 3 box reversal.
The stock rises from Rs 500 to Rs 563 over eleven sessions. Plot Xs at 510, 520, 530, 540, 550 and 560: 6 Xs in one column. The Rs 3 above 560 does not fill a box, so it is discarded.
Now the stock falls to Rs 525. A reversal needs 3 boxes down from 560, so 3 multiplied by 10 = Rs 30, meaning price must reach 530. It does. Move one column right and plot Os at 550, 540 and 530. The dip to 525 leaves the 520 box unfilled, so no fourth O.
The stock then turns up to Rs 572. A new X column needs 3 boxes above the lowest O at 530, so 560. Price clears it: plot Xs at 540, 550, 560 and 570.
That column has pushed above the previous X column high of 560: a double top buy signal, the most basic entry the method gives.
Look at what is missing. Eleven sessions, several flat days and a gap collapsed into two columns.
Common settings and what they do
| Box size | Reversal | Signal frequency | Noise level | Typical use |
|---|---|---|---|---|
| 0.5% of price | 3 boxes | High | High | Short term swing trading |
| 1% of price | 3 boxes | Moderate | Moderate | General equity charting |
| 2% of price | 3 boxes | Low | Low | Position trading, index charts |
| 1% of price | 1 box | Very high | Very high | Intraday, rarely worth it |
One rule saves grief: pick settings before you look at the chart.
The signals the method produces
- Double top buy: an X column rises one box above the previous X column high, the simplest bullish trigger.
- Double bottom sell: an O column falls one box below the previous O column low.
- Triple top and triple bottom: the same break through two prior columns, treated as stronger.
- Bullish catapult: a triple top break, a pullback that holds, then a fresh break up.
- Trend lines: a 45 degree support line up from the lowest O, or a resistance line down from the highest X, used as filters.
Because the grid is fixed, these breaks land on exact prices you can write down in advance. That beats freehand support and resistance levels on a bar chart, where two people rarely draw one line the same way.
How do you set a price target from a point and figure chart?
The standard method is the vertical count: take the Xs in the column that produced the buy signal, multiply by box size, multiply by reversal amount, then add the price of the lowest X in that column.
In the worked example the breakout column had 4 Xs, box size Rs 10, reversal 3 boxes, lowest X at 540. The count is 4 multiplied by 10 multiplied by 3 = 120. Add 540 and the target is Rs 660.
Treat that as arithmetic, not a forecast. Counts are often exceeded and often never reached. Their real use is deciding in advance whether the reward justifies the stop.
How is point and figure different from candlestick charting?
Candlesticks record every fixed period: open, high, low and close. Point and figure records only moves large enough to matter and has no concept of a session.
So there are no gaps, no doji, no inside bars and no volume. Every candlestick pattern built on the open to close relationship is unavailable. In exchange, a three month consolidation that fills half a candlestick screen may occupy four columns.
Keep both open: the grid for structure and levels, the time based chart for entry timing and volume. New to both? Start with what technical analysis actually does.
Setting one up without overcomplicating it
- Pick a liquid stock or index with at least two years of history.
- Set box size at 1% of price and reversal at 3 boxes.
- Mark every prior double top and double bottom, and write the prices down.
- Draw the 45 degree support or resistance line from the last turning point.
- Trade only with that line, and only on breaks of a recorded level.
- Put the stop one box below the previous O column low, fixing risk in rupees from the start.
Where the method falls short
It is slow. In a fast reversal, the 3 box requirement means surrendering part of the move before the chart acknowledges the turn.
It ignores volume, a real loss when judging participation in a breakout, and it ignores time, so you cannot tell whether a column formed in a panic or over a quiet quarter. Signals are also sparse, so a single stock backtest gives few samples.
Risk note: point and figure organises price data, it is not an edge in itself. Signals fail regularly. Position size and a predefined stop matter more than the pattern.
Frequently Asked Questions
Do I need special software to draw a point and figure chart?
Most charting platforms include it as a chart type, usually near Renko and Kagi, and you only set box size and reversal amount. Drawing one by hand on graph paper once is genuinely useful, because it forces you to see how much data the method throws away.
What box size should I use for Indian stocks?
A percentage box beats a fixed rupee box in a market where share prices run from double digits to tens of thousands. Start at 1% with a 3 box reversal for swing trading, and use 2% for index charts and longer holds.
Can point and figure be used for intraday trading?
It can be plotted from intraday data, but the method exists to filter small moves and intraday charts are mostly small moves. A 1 box reversal produces constant column changes and little signal. Most practitioners stay with daily closes or daily highs and lows.
Does point and figure work on Nifty and Bank Nifty?
Yes, and index charts often suit it, because indices trend more smoothly than single stocks. Use a percentage box so sensitivity does not drift as the index rises over years. A chart signal still says nothing about the cost or risk of the derivative you trade it with.
Why does my chart look different from someone else’s on the same stock?
Almost always settings: a different box size, a different reversal, or one chart built from closing prices while the other uses highs and lows. Agree the settings before comparing, otherwise you are looking at two different filters of one dataset.
Key Takeaways
- Box size sets the minimum recorded move; the reversal amount, classically 3 boxes, sets when a new column begins.
- Fix settings before viewing the chart; adjusting them until a signal appears is curve fitting.
- A double top buy is one box above the previous X column high, an exact trigger price known in advance.
- The bullish vertical count is Xs in the signal column times box size times reversal, added to the lowest X: 4 by 10 by 3 plus 540 = Rs 660.
- It ignores volume and time and reacts late, so pair it with a time based chart.
