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The Definitive Guide to Point and Figure

A Comprehensive Guide to the Theory and Practical Use of the Point and Figure Charting Method

By Jeremy du Plessis
Cover of The Definitive Guide to Point and Figure (Hardback) by Jeremy du Plessis

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About the Author

Jeremy du Plessis

Jeremy trained as an automotive engineer, then an economist, but gave them both up to become a Technical Analyst. In 1983 he founded Indexia Research and pioneered the development of PC based technical analysis software with the Indexia range of technical analysis systems. During the 1980s he developed a number of technical tools and indicators under the banner of Indexia, which are still used in ... Read more on Jeremy du Plessis

Contents Listing

About the Author
Preface to the Second Edition
Preface to the First Edition
Introduction
Introduction to Technical Analysis

1. Introduction to Point and Figure Charts
History and development
Where did Point and Figure charts get their name?
The use of Point and Figure charts over the years
The voice of the market

2. Characteristics and Construction
Characteristics of Point and Figure charts
Point and Figure construction
3-box reversal charts
5-box reversal charts
2-box and other reversal charts
Summary so far
The move from intra-day to end-of-day - The great controversy
End-of-interval time-frame Point and Figure charts
Log scale Point and Figure charts
Summary

3. Understanding Patterns and Signals
1-Box and 3-Box Reversal Charts
Point and Figure signals
The strength of the pattern
The breakout and pullback
Terminology clarification
1-box and 3-box patterns
Traps
Broadening patterns
Bullish and bearish patterns that reverse
Poles
Other Patterns
Congestion analysis
Signals with the trend or against the trend
Summary

4. Understanding and using Trend lines
Trend line breaks
45° Bullish support and bearish resistance lines
Trend lines and signal rules
Summary

5. Projecting Price Targets
Counts on 1-box reversal charts
Counts on 3-box reversal charts
Things you should know about Point and Figure counts
Counts on other box reversal charts
Counts on log scale charts
De Villiers and Taylor 3-box horizontal counts
Risk and reward
Another way of projecting targets - Fibonacci retracements
Summary

6. Analysing Point and Figure Charts
Implications of changing the construction parameters
Choosing your chart parameters
Drawing your first Point and Figure chart
Showing gaps
Other ways of determining box size
Analysis of 3-box reversal charts
Analysis using 1-box reversal charts
Analysis of 2-box charts
Stoplosses on Point and Figure
Low-risk entries
Summary

7. Point and Figure Charts of Indicators
Point and Figure of relative strength
Point and Figure of on-balance volume
Point and Figure of oscillators
Summary

8. Optimisation of Point and Figure Charts
The case for and against optimisation
Approaching Point and Figure optimisation
Optimising for specific patterns
Conclusion

9. Point and Figure's Contribution to Market Breadth
Introduction
A caveat
Bullish Percent
Bullish Trend Percent
X-Column Percent
Other Market Breadth Indicators based on Point and Figure
Market Breadth on other markets
Summary

10. Advanced Point and Figure Techniques
Moving averages on Point and Figure
Parabolic stop and reverse (SAR) on Point and Figure
Bollinger Bands on Point and Figure
Activity histograms
Summary

11. Chart Examples
Spot Euro Dollar (daily) 0.01 x 1
Spot Euro Dollar (60 minute) 0.01 x 1
Gold PM Fix 5 x 1
Gold PM Fix 5 x 3
Brent Crude Index (IPE) 2% x 1
Brent Crude Index (IPE) 1% x 3
MIB 30 Index 1% x 3
Nikkei 225 Index 100 x3
Hang Seng Index 100 x3
DJ Euro Stoxx 50 1% x3
Infineon Technologies AG 2% x 3
IBM 1% x 3
Compuware Corporation 1% x 1
Intel Corporation 0.25 x 3
American Express Company 1.5% x 3
Three month sterling interest rate future (June 2005) (60 minute) 0.025 x 1
Gold 15 x 3
US 10 year yield 0.025 x 3
Brent Crude
Summary

12. Dividing your Stocks into Bullish and Bearish

Conclusion

References and Further Reading

Appendix A - Construction of 2-Box Reversal Charts
Example of a 10 x 2 Point and Figure chart

Appendix B - Construction of 1-Box Reversal High/Low Charts
Example of a 10 x 1 Point and Figure chart using high/low prices

Appendix C - Construction of Log Scaled Charts

Index
About the Author
Preface to the Second Edition
Preface to the First Edition
Introduction
Introduction to Technical Analysis

1. Introduction to Point and Figure Charts
History and development
Where did Point and Figure charts get their name?
The use of Point and Figure charts over the years
The voice of the market

2. Characteristics and Construction
Characteristics of Point and Figur ...

Jacket Text

Point and Figure charts are one of the great secrets of the Technical Analysis world. Highly sophisticated and with a thoroughbred pedigree, they can, however, be overlooked by traders today. Jeremy du Plessis - one of the foremost Point and Figure experts in the world - returns with a fully updated second edition of this definitive guide in an effort to redress this imbalance.

This second edition, with an extensive revision to the text and introduction of brand new techniques, demystifies the world of Point and Figure charting. It includes a detailed explanation of the history and development of the technique from its invention to the modern day, and covers the makeup of the chart patterns, why they are created, and how to interpret them.

Throughout, readers are encouraged to understand Point and Figure charts from first principles, rather than just remember the names of a series of patterns. It is the first major work for 50 years to discuss in depth the original 1-box reversal method of Point and Figure charting and contrast it with the more popular 3-box reversal method. Further, the explanation of how to use Point and Figure charts to project targets and calculate risk-reward ratios is the most comprehensive ever seen.

Also featured in the second edition are:

- A step-by-step analysis of the FTSE 100 Index using the 3-box method, as well as the NASDAQ Composite Index, using the 1-box method

- A detailed discussion of optimising techniques

- An in-depth chapter on Analysing Point and Figure charts, extensively rewritten from the first edition

- A new explanation of how Point and Figure parameters are chosen and the implications of choosing them

- Two new Point and Figure construction methods never seen before

- Point and Figure's contribution to market breadth, with a look at bullish percent and two brand new indicators

- Full discussion of Point and Figure gaps and how they provide valuable information about the chart

- Lesser known, more advanced techniques such as the use of moving averages, parabolic SAR and Bollinger Bands on Point and Figure charts

- Price and volume activity histograms and how they provide information about support and resistance

All this is illustrated with numerous colour charts and observations from years of trading experience.
According to du Plessis, Point and Figure charts are the 'voice of the market'. This book helps you listen to, and understand, that voice.

Part of the Market Technicians Association (MTA) Required Reading list.

Professional Reviews

Not only does Mr. du Plessis plumb the history and elucidate the present state of point and figure analysis, he looks at a craft many regard as passe and sees a vibrant future. This eye-opener is a welcome addition to the literature of technical analysis. John Bollinger, CFA, CMT, President, Bollinger Capital Management

Even though point and figure charting is 120 years old, Mr. du Plessis has brought a truly fresh and authoritative approach to a subject that is central to technical analysis. Bravo! Bruce M. Kamich, CMT, Adjunct Professor of Finance at Baruch College, Past President of the Market Technicians Association

If you had to go to a desert island and were only allowed to take one investment tool with you, then it should be the Point and Figure chart. If you were also allowed to take only one book, other than the Bible and the works of Shakespeare, then make it this Definitive Guide by Jeremy du Plessis. The whole subject is covered from its early historical beginnings as a way of noting the noise of the ticker tape in the days of Charles Dow, then called the Book method, through its evolution to become the 'Voice of the market'. How to construct and use the charts and their unequivocally clear buy and sell signals, revelation of trend, reversal, support and resistance levels are all revealed and well illustrated. The subject is explained as an evidence gathering procedure, that leads to a successful trading method, with accurate entry, stop loss, and targets. It is also brought right up to date with some new thinking involving indicators such as OBV, Bollinger bands, and parabolic stop and reverse signals.You will have such a great time working through it on your desert island that you might not want to come home. Robin Griffiths FSTA, Head of Asset Allocation, Rathbone Investment Management

A superbly comprehensive book on this powerful technique from one of the world's leading experts on the subject. A must read for all serious technicians and investors. Adam Sorab, Chairman UK Society of Technical Analysts

Rarely does a book live up to its claim of being the 'definitive' guide to something. Jeremy du Plessis' new book lives up to that claim and more. It's almost impossible to imagine a more definitive treatment of point and figure charting. The author pays homage to its early development and the pioneers who first wrote about it. He gives extensive coverage to the original 1-point reversal method before moving on to the more modern methods. The subject is examined from every conceivable angle. I'm not aware of anyone who has even attempted to combine p&f charting with so many modern technical indicators. I expect that du Plessis' book will not only become the definitive book on point and figure, but will also become a classic in the field of technical analysis. John Murphy CMT, Author of Technical Analysis of the Financial Markets

"Let me say that from first learning of point and figure charts on one of your courses I have seen them as a very useful trading asset and have taken a particular interest in them. I have been quickly through Jeremy's book and one of the things that I have found to be very useful is the combination of the moving average with the point and figure chart." - T.D. Belfast

"I used to be a great believer in P&F in the days when I was a junior floor trader fifty years ago but never found anything a tenth as informative as Jeremy's book is obviously going to be. Some of his pattern identification awoke instant recognition - so I am looking forward to getting in deeper, particularly to better understanding of the counts. I shall take it on holiday with me next month." - A.B. Suffolk

"I am enjoying the book immensely and have started some sections for the second time. I have several books on Point & Figure but this book is a step change in conveying a real understanding. None of the others present the subject in such an explicit and erudite manner with such a nice easy style. Understanding the basis of signals gives you a much better feel." - N.B. West Sussex

"I have been using point and figure charting techniques since early in the year. So I was looking forward to receiving Jeremy's book and I have not been disappointed. I am currently on Chapter 4 and enjoying starting from the basics again. Using point and Figure I am far more comfortable with my way of investing than I have ever been with any other charting system." - A.B. Notts

"In the first few pages I have read I have found the book most informative and very interesting. I have covered the chapters on the origins of point and figure or figure charts. I like Jeremy's style and way of explaining things so I am really looking forward to reading the whole book cover to cover as soon as I can." - R.D. Powys

"I am only part way through your book but I am thoroughly enjoying it. In the past, point and figure did not seem to work for me but already I can see were I may have misread the signs together with new signals that I had not appreciated were there. A great, easy to read book." - R.B. Hassocks

"I'm on page 123 after a few days. I have made myself read every page! The quality of the book is impressive. It is clearly and authoritatively written, enabling me to get into the meat of P&F quite easily." - M.R. Cornwall

"I have to say that Jeremy's Book is absolutely 'brilliant'! I am now on my second reading but understand it perfectly. It runs smoothly and is easily understood. I have always liked point and figure but never really understood the intricacies of principle. These have been perfectly elucidated and I congratulate Jeremy on an exceptional reference." - G.G. London

"I have read the book from cover to cover, I couldn't put it down." - I.M. Kent

"Without question, one of the great technical analysis books currently available" - The Technical Analyst

Shortlisted for the 2013 Technical Analyst Book of the Year Award


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Media Coverage

Traders' Magazine

Point and Figure charting may be the oldest method of charting the market in the Western world but, as Jeremy du Plessis is keen to tell us, that does not mean it should be overlooked as a technique ...

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Stocks & Commodities

This book covers the subject of point & figure from its beginnings through its evolution to become the voice of the market. How to construct and use the charts and their buy and sell signals, ...

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Traders Day Trading

Point and Figure charts are different from any other chart used in technical analysis. The main reason being that they do not have a time scale. The chart does not advance as time passes but rather ...

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Geek Crew

Highlighted as recommended reading by Prashant Shah as part of a Dotnet tutorial, covering An Introduction of Point & Figure charts via Geek Crew: Best Coding Tips

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Coin News Telegraph

We can predict and forecast a future profit target by utilizing a Point & Figure chart. By utilizing the methods described in Jeremy Du Plessis’s book, “The Definitive Guide to Point and Figure ...

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