The Complete Guide to Point-and-Figure Charting

The Complete Guide to Point-and-Figure Charting

Heinrich Weber and Kermit Zieg
Sep 30, 2003
Harriman House
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UK and European traders, since it uses recent charts of FTSE and European securities as examples, and includes hitherto unpublished research on p&f's applicability to European securities.
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Latest reviews

Not profitable

Most of the examples DONT WORK, the methods would whipsaw the trader to death.
Weber and Zieg P&F

I was 17 pages into my review, caught a mouse key and it disappeared! Off we go again then.
V1 went into the book page by page - this'll be shorted. It's a nicely laid out book, well illusatrated, a good size and friendly read. Cover price £29.99, but usually available for less - I have a link to the Global bookshop on my site, which gets it for £23.99 and I expect T2W has a similar link operating. Good value at that price I'd say. (end of disclaimer!)

Starting with basic chart drawing and construction, the book includes info on patterns, drawing and understanding trendlines, price targets and so forth - common to all P&F books. What is interesting about this book is that they comment about effectiveness quite often - they're not slow to share their knowledgeable opinions on pickig the boxsize and so forth. Sometimes I disagree with the authors - there are a HUGE number of variables that can affect trades, I think it's incorrect to state 'X doesn't work', I tend to phrase it more like 'I can find no evidence to support the view that...' Just because you can't find something doesn't mean nobody else can either!

That aside I liked their approach - it's good to see people commenting on effectiveness as they write, far too many books (especially, it seems to me, on P&F) rely on things being just so because the last 20 books all said that.
Section 1 on drawing charts leads into 2, on Trendlines - this ends with a short summary on how you might trade the information gleaned so far. Section 3 goes into a wide range of subjects, some skimmed lightly - calculating price targets, stops, risk, pyramiding, 3 or 4 trading styles and a bit about brokers' commissions ... too much for 70 pages, I suspect they'd have preferred a much bigger book <g>
Seriously, this section covers a lot very quickly, for some topics it is really only a taster, showing you areas to investigate further.

Two more sections follow, Optimisation is interesting and gives food for thought, continuing the theme seen throughout this book - how can I use this to trade? The final section (barring index and various Appendices) devote 40 pages to looking at studies (backtesting) with fairly recent tests. I applaud this too - far too often downright misleading percentages get banded about, and when you chase the story further you find you've been looking at a study conducted in 1962...

Overall - quite ambitious, tries to cover more ground than it has pages for - this would have made a bigger book quite easily, but would have edged into the 'deep thought' arena as the price rose - I suspect this book was deliberately kept this size to make it appeal to more users. I kept getting the feeling that the authors wanted to charge off into a deep, heavily mathematical study which I'd have welcomed personally, I thought they did a good job of shining a light on the subject which is a nice contrast with the somewhat formulaic approach of other books on the subject.
I'd place this at the beginner - Intermediate level, it explains the basics for new P&F users but contains info and ideas that many a more experienced user will happily chase up.
Good value