The Complete Guide to Point-and-Figure Charting

Jacket text for The Complete Guide to Point-and-Figure Charting

The aim of this book is to explain point-and-figure charting to European investors and traders, and to show why it is the most reliable technical tool for timing entry and exit points in stocks, indices and other securities.

The book is written for all levels of trader, from the novice to the experienced. It starts by explaining the basics of point-and-figure, and by showing its advantages over other types of chart. Readers are then given step-by-step instructions on how to start a point-and-figure chart from simple price data, and how to add to it day-by-day using simple rules based on end of day highs and lows. The emphasis is on simplicity and clarity.

The section on chart interpretation introduces the basic buy and sell signals, and goes on to explain the more complex signals, in each case illustrating the pattern, and the precise entry and exit points, with colour charts from FTSE stocks and indices. It also shows how trend lines are incorporated into a chart.

The latest point-and-figure trading techniques are covered in depth. The authors show how to: use horizontal and vertical counts to estimate the size of price moves, use stop-orders to protect positions, use pyramiding to maximise profitable trends, and use swing trading in combination with p&f. They also show how to adapt your trading style to the amount of capital you have available and to your risk tolerance.

In the later sections of the book, the authors concentrate on optimisation of p&f trading and the avoidance of the most common trap - 'over-fitting', and on analysis of the profitability of p&f trading. They demonstrate conclusively that point and figure, correctly applied, produces consistent and reliable profits across a variety of markets.

In summary, Heinrich Weber & Kermit Zieg's book is the definitive guide to the theory and application of point-and-figure charting. It is especially welcome for UK and European traders, since it uses recent charts of FTSE and European securities as examples, and includes hitherto unpublished research on p&f's applicability to European securities.

Chapter headings for The Complete Guide to Point-and-Figure Charting

About the authors
Preface

Introduction
- Why Point-and-Figure?

1. Drawing point-and-figure charts
- Background
- How to draw the charts
- Computerised charting

2. Interpreting the charts
- Buy and sell formations
- Trend lines

3. Trading applications
- Judging the distance of a move
- The use of stop orders
- Risk and Position size
- Pyramiding made simple and profitable
- Swing Trading
- Day-trading, speed trading, scalping and market making
- Extending the Point-and-Figure technique to include other markets
- About positions, commissions and brokers
- Tips from experienced traders

4. New optimisation techniques
- Optimisation techniques - making the good better
- Optimisation with a standard software package
- How to benefit from optimisations

5. Profitability analysis - does Point-and-Figure charting really work?
- Why point-and-figure is a good trading system
- Introduction to the historical studies
- The profitability of Point-and-Figure stock trading - the original research
- The profitability of Point-and-Figure commodity futures trading - the original research
- Later commodity profitability research
- Profitability of Point-and-Figure commodity trading 1996-1997
- Profitability of Point-and-Figure stock trading 1994-1996
- Zieg-Weber study on European stocks 1988-2002

6. Technical notes
- The conflict between technical analysis and academic research
- More about scaling
- Description of the program environment used

Appendices
- Quick reference guide to buy and sell signals
- Glossary
- Recommended websites
- Bibliography

Index

About Heinrich Weber, Kermit Zieg

Heinrich Weber is a partner and risk manager of DeTraCo, an active Eurex member firm. He develops risk models and financial forecasting applications with AleaSoft, the European leader in the use of neural networks for the prediction of energy prices. Kermit Zieg is a Full Professor of Finance and Investments at Florida Institute of Technology's National Capital Region campus in Alexandria, Virginia, where he keeps his finger on the pulse of the markets through active trading. His two major areas of trading and research interest are point-and-figure charting and options.

More about Heinrich Weber, Kermit Zieg

Reviews for The Complete Guide to Point-and-Figure Charting

'This book covers far more than the basics of P&F. It provides a recent reliability test of the method, and actually looks at trading rather than just signal spotting. As such it would be a natural 'primer' for new users, whilst providing plenty for the more experienced type.'
Dave Baker, PFscan Charting Software