Point & Figure - A Dying Art?

[timsk]

A search on P&F throws up 18 threads which, on the face of it, shows considerable interest in the subject. However, upon closer inspection, only 3 of the 18 have more than three replies! This is in spite of three articles in the K' Lab, a major new book on the subject (The Definitive Guide to P&F by Jeremy du Plessis) and a huge plug for the charting method by respected swing trader and author Marc Rivalland. The efforts of the pundits to promote P&F appear to be wasted on the T2W membership. Why is this? Is no one using P&F?

This thread is started in the hope that anyone with any interest in and/or knowledge of P&F will share their thoughts for the benefit of others. If you use it - how do you use it? Is it your 1st choice T.A. method., or do you use it to confirm / negate signals from others sources? What do you see as the major benefits and drawbacks of P&F; what do you like and dislike about it? Actually, it would be good to hear from anyone who has anything to say about it! However, based on the 'trend' of the previous 18 threads, I won't hold my breath.
Tim.

 

[Jack o'Clubs]

Hi Tim,

I've long had an interest in P&F (a P&F book was one of the first TA books I bought), and I brought myself up to date with the excellent 'Complete Guide to P&F Charting' (Weber & Zieg). The only problem is... I've yet to find a profitable way of implementing it.

What I mean is, I love the theory and agree that discretization of price is superior (in my mind) to that of time, as you get on a conventional chart. But, no matter how I back test and whether I try and optimise or use the standard 3 box reversal / scaling, it seems over-prone to whipsaws. It doesn't seem to get me into trades any earlier than either my tried and trusted tweaked MACD, or using support and resistance.

My trading style is fairly diverse (I run one pot of cash on longer term position trades, but also dabble in day-trading forex and index futures) and I can't get it to work for any of them.

What's interesting in the Weber & Zeig book is a chapter on profitability. They quote early research by a guy called Davis who did very comprehensive testing for various P&F signals - the only catch is that it was in the '60s. To give two examples, he found that 6.6% of all buy signals were given by the Ascending Triple Top Pattern (B4), but of the B4's that occured 79.5% were profitable and the average profit 36% compared to 8% for the average loss. Similarly Triple Bottom Breakouts (S3) made up 15.5% of all sell signals and were profitable 93.5% of the time at an average profit of 23% vs a 9% loss for the minority of S3's that failed. Sounds great... But when I spent a few days testing those two patterns on a number of FTSE stocks over the last eight years it was nothing like as successful either in terms of % successes or profitability.

It's interesting that you quote Rivalland as I read his column in Investors Chronicle. I remember him writing that 2005 was a difficult year, and he certainly seems to have as many knockbacks as successful trades. I don't know if he exclusively uses P&F, but if he couldn't make money in strong trending markets like we had through all of last year...

So, I've put my P&F book down in disappointment (again), no doubt to pick it up again in another 6months and have another go!

I'd be interested in hearing how you make it work (if you do!).

Regards.

 

[Glenn]

A search on P&F throws up 18 threads which, on the face of it, shows considerable interest in the subject. However, upon closer inspection, only 3 of the 18 have more than three replies! This is in spite of three articles in the K' Lab, a major new book on the subject (The Definitive Guide to P&F by Jeremy du Plessis) and a huge plug for the charting method by respected swing trader and author Marc Rivalland. The efforts of the pundits to promote P&F appear to be wasted on the T2W membership. Why is this? Is no one using P&F?

This thread is started in the hope that anyone with any interest in and/or knowledge of P&F will share their thoughts for the benefit of others. If you use it - how do you use it? Is it your 1st choice T.A. method., or do you use it to confirm / negate signals from others sources? What do you see as the major benefits and drawbacks of P&F; what do you like and dislike about it? Actually, it would be good to hear from anyone who has anything to say about it! However, based on the 'trend' of the previous 18 threads, I won't hold my breath.
Tim.

Tim
I started out with P&F charts only, quite a few years ago, for position trading. They saw me through my early UK share dealings and the dot-com era and bubble-burst and I did very well out of it. Got me out of techs in March 2000 right at the top.
I believe that Jerry Olson on this board still uses them and he is still a subscriber to Tom Dorsey's service. www.dorseywright.com

DaveJB on this board sells PFScan. I used to use BeBroker from Australia - great for charting but I found it very hard work to keep all the data up to date in order to calculate the Bullish Percent charts from Metastock's database (I had to buy Metastock to drive BE Broker).
I never did find a way to automatically update my data with all the company movements between sectors.
I did look at Indexia from Jeremy du Plessis (now part of Updata) and that was a good package too for P&F charts with auto target calcs, but it didn't produce bullish percent charts - no idea if it does now.
One word of warning about Bullish percent charts - they don't work very well on many UK market sectors (e.g. Banks) because the number of stocks per sector is too low for the chart to be any use regarding the OB/OS approach.
However I do believe that P&F charts themselves are worth learning and using if you really make the effort. Nothing good is ever easy imho.
Where did I end up ?
Once I had become proficient in P&F I started to find other TA (non-indicator) things out for myself after plodding remorselessly for months through every single bar-chart in the UK market and eventually moved away from P&F.
For the past ~5 years I've only been using naked bar charts with no indicators whatever except a bit of volume. And most of the time I only trade Ftse100 futs.
Hope this helps.
Glenn

 

[oatman]

I have used P&F successfully for breakouts. Obviously not so good if volatility falls.
Most people don't understand it and can't be bothered to learn it. P&F charts were our wallpaper when I started in the City. Worth knowing.

 

[zambuck]

......Does anyone know the source of the name - 'point' and 'figure'....

.....What is the reasoning behind the name when chart is 'noughts' and 'crosses'.....

...This is not a test question by the way.....!!

 

[LevII]

The great shame is that DaveJB (http://www.pfscan.com) no longer sells PFScan which is a superb little program. Dave also has a first class understanding of P&F principles. Whether or not he makes money from trading P&F I do not know. Perhaps a question for Dave.

I have toyed with it for years but have never really got to trust P&F but having heard what Jerry Olsen has to say I may fire it up again.

 

[LOCOPERRO]

http://www.dukascopy.com/ do an online f&f for forex

 

[timsk]

Thanks!

Thanks for your respective replies one and all!

I have just bought the Jeremy du Plessis book and am about a third of the way through, so I'm very much a learner. P&F appears to me to be a very good tool for filtering out noise and preventing one from exiting a trade too soon. However, a moving average could, arguably, be used to achieve the same result. By the same token, P&F could help ensure that you don't jump the gun and enter a trade too soon prior to a decisive signal being given. The problem with this is that you run the risk of joining the party too late and missing part of the ensuing move and/or being whipsawed out of the trade at the next correction. Perhaps these issues are addressed later on in the book. One aspect of P&F charts that I like a lot is their black and whiteness. Jeremy du P' recommends dividing your watchlist into two halves - bullish and bearish. If the current plotted column is (blue) crosses, the instrument goes into the bullish camp and if the current column is (red) zeros it goes into the bearish camp. A very simple, consistent, quick and objective way of deciding which camp any instrument should go into.

If anyone fancies posting a chart to illustrate how they use P&F - that would be great. Outside of the K Lab, I don't recall ever having seen a P&F chart posted to a thread before, which kind of underlines the sentiment expressed in my opening post!
Tim.

 

[Mayfly]

Hi Guys,

I can’t really believe that no one’s posted a P&F chart on these boards before, in fact I’m pretty sure that someone posted one of LRCX’s fairly recently on one of the Nasdaq threads, although I don’t seem to be able to find it?

As I recall, Marc Rivalland has fairly catholic tastes when it comes to charting – and bear in mind he was writing in 2001 – he devoted an appendix of his book on integrating point and figure with swing charts, where he gave primacy to the Point & Figure chart; or at least he did so in terms of his outline rules in the sense that positions should be initiated on P&F patterns, “unless they were countermanded by the swing chart. The swing chart does not have to agree the P&F chart – but it must not be diametrically opposed to the point & figure chart”.

Not that these were the extent of his rules and you’ll recall that he also used other techniques in combination with P&F and swing charts (these being his own modified version of Gann Swing charts), which he combines with RSI among other techniques. I’ve only mentioned this because the Updata software did not support any market breadth indicators at the time when Marc Rivalland was writing his book, but it does now and so I think that we can safely assume that Marc Rivalland will have updated his approach to incorporate these indicators where and whenever he considers them to be helpful to his trading?

I’ve attached some charts by way of illustration.

HTH

Cheers

Mayfly

 

[zambuck]

ShareScope has collaborated with Marc Rivalland to add Swing Charts to its intraday and real-time packages. See link below.....

P & F charting method is also available in the package.....

http://www.sharescope.co.uk/swingtrading.php

 

[Mayfly]

Zambuck, wrote:

ShareScope has collaborated with Marc Rivalland to add Swing Charts to its intraday and real-time packages. See link below.....

P & F charting method is also available in the package...

That’s great news and I’m really pleased for all the little Sharescopies out there who may finally be able to produce some decent P&F charts? Mind you, I like to believe that I’m open minded and on the basis that I’m always ready to be disabused of the conventional or received wisdom, such as - and I can assure that the quote from these boards isn’t mine - “because the P&F was so bad in Sharescope, I'm unaware of anyone who actually has ever said a word in favour of S's P&F charts!”.

Still, there’s always a first time for everything and so may be you’d like to post some charts? Swing (trend in line or Manhattan) or P&F, anything will do?

Cheers

Mayfly

 

[zambuck]

..........If I were you then I would buy the package and test it myself........As an 'expert' on these matters perhaps you could enlighten the sharescope users.....!!!

.....Quotes will be dime a dozen.....Just use it and test it to know if it is good or bad....!!

....Little Sharescopies..??......This kind of patronising statement proves that sharescope has scored point over other rubbish software houses...No names........!!

 

[barjon]

in defence of sharescope and us little sharescopies i think their p&f option is pretty good now. it comes with all the bells and whistles you'd expect.

here's a screen shot

good trading

jon

 

[zambuck]

......Thanks.....You beat me to it......

.....Let's see what the self proclaimed experts have to say......

 

[Jack o'Clubs]

When I was looking at getting a P&F package I think the only thing that put me off Sharescope, compared to, say, Updata, was that Sharescope doesn't allow log scaling. Other than that the revised P&F package within Sharescope looked top-notch. Can any Sharescope users confirm whether that's still the case?

 

[zambuck]

......In P & F '%' is for Log Scale...and '$' is for Normal Scale......In SC you get choice of 'Box' value or 'Percentage' value...

....Look at the chart above and in particular top left line....it says 1% box, 3 rev......

....As Jeremy's Book has been reduced in price now, I have ordered it for this years holiday reading....See link below....

http://books.global-investor.com/books/21822.htm?ginPtrCode=00000

 

[Jack o'Clubs]

Thanks Zambuck - sorry to labour the point, but that is definitely % Log Scale and not % Linear Scale in Sharescope? I thought you could set the box value or % value, but % was linear not log. If the latter then Sharescope definitely up there with the best.

 

[barjon]

jacko

from sharescope help

% of value

The box value can be set as a percentage of the current box value.

i.e. if set to 5%, and the current level is say 120p and the price movement is upwards, then further upward movement will be produced if the price exceeds 126p (105% * 120p) and a reversal will occur if the price falls to 114p (95% * 120p).

This option will produce charts of a logarithmic nature having boxes whose value range increases with the value level of the box. That is, at the level of 100p, the box range will be 100 to 105p, at the level of 1000p the box range will be 1000 to 1050p. Conversely at 1p the box range will be 1 to 1.05p.

cheers

jon

 

[Dentalfloss]

you can get free eod p/f charts on www.prorealtime.com.you can input all the parameters

 

[timsk]

....As Jeremy's Book has been reduced in price now, I have ordered it for this years holiday reading....See link below....

Jeremy du P's book is indeed available at a price more favourable than the RRP of £59.95, I bought my copy from Amazon for £38.68 inc. P&P.
Viz a viz Sharescope, I am as new to them as I am to P&F, so I'm not really able to comment other than to say that the limitation of their charts appears to be that they are constructed from either E.O.D. close data or high/low data - there isn't the option of having them constructed from intra day 'tick' data. I guess the relevance of this is governed by the individual trader's application of the charts.

Good to see charts posted and the the discussion developing folks - thanks for the input.
Tim.