Complete Guide to Point-and-Figure Charting

By Heinrich Weber and Kermit Zieg

Quick Summary

Weber and Zieg provide a comprehensive reference guide to Point-and-Figure charting, covering everything from basic chart construction and scaling through advanced pattern recognition, trading strategies, and applications across stocks, indices, bonds, and commodities. The book serves as both an educational text for beginners and a detailed reference for experienced practitioners of this venerable charting methodology.

Detailed Summary

Chart Construction Fundamentals

The book begins with the basics of Point-and-Figure chart construction: how to scale charts using standard and variable box sizes, the mechanics of the reversal process, how to choose appropriate box sizes for different instruments and time frames, and the logarithmic scaling alternative for long-term analysis. The Dow example demonstrates scaling principles with practical step-by-step instructions.

Buy and Sell Signals

An extensive catalog of Point-and-Figure buy and sell signals is presented: simple buy and sell signals, breakout of triple top and triple bottom patterns, spread triple bottom, descending triple bottom, upside and downside breakouts of bullish and bearish support/resistance lines, and breakouts of bullish and bearish triangles. Each signal is illustrated with clear diagrams and explained in terms of the supply-demand dynamics it represents.

Trend Lines and Price Channels

The four price channels framework organizes the trend line methodology: bullish support lines, bullish resistance lines, bearish support lines, and bearish resistance lines. The construction, adjustment, and interpretation of these trend lines provide the directional context within which individual buy and sell signals operate.

Trading Applications

Practical trading chapters cover day-trading with Point-and-Figure, position sizing (including pyramiding strategies), stop order placement, swing trading approaches, and profit-taking strategies (including taking profits early and the trade-offs involved). The signal/trade gap -- the difference between when a signal is generated and when a trade can be executed -- is addressed honestly as a source of slippage that must be accounted for in realistic performance expectations.

Advanced Topics

Later chapters address the random walk theory debate (whether Point-and-Figure analysis can add value given the efficient market hypothesis), the use of volume data alongside Point-and-Figure charts, reversal patterns, RSI integration, and the application of Point-and-Figure methods to bonds, commodities, and market indices. Transaction cost analysis ensures that strategies remain practical after real-world friction.

Categories

• Technical Analysis
• Trading Systems
• Beginners

Key Takeaways

• Point-and-Figure charts filter out noise and focus purely on significant price movements
• A systematic catalog of buy and sell signals provides objective, repeatable trading criteria
• Trend lines and price channels provide directional context for individual signals
• Position sizing, stop placement, and profit-taking rules must account for the signal/trade gap
• Point-and-Figure methods apply across stocks, indices, bonds, and commodities