Point and Figure Charting The Essential Application for Forecasting and Tracking Market Prices Wiley Trading
“Everyone who’s involved in financial markets must understand Point and Figure charting in order to get the full picture, whatever your view of technical analysis”. - Jim Rogers, author of Hot Commodities and Investment Biker
“An invaluable road map for managing risk in the markets. Tom’s methodology has given us the discipline and confidence to look around corners for our clients for almost twenty years.” - James A. Parish, President and COO, Morgan Keegan & Co., Private Client Group
“Tom Dorsey continues to be one of the foremost authorities on Point and Figure charting. His relative strength analyses are essential for investors and traders alike. Furthermore, I always want to know what his NYSE Bullish Percent Indicators is “saying.” - Lawrence G. McMillan, President, McMillan Analysis Corp., www.optionstrategist.com
“Tom Dorsey has done it again… he has taken his 30-plus years of unending devotion, talents, and insights in technical analysis and applied them to Exchange Traded Funds. He begins with the history of ETFs, explains how different they are from mutual funds, and then applies his expertise in Point and Figure charting to help traders and investors time their purchases and sales.” - Ralph J. Acampora, CMT, Director of Technical research, Knight Capital
“Reading Tom Dorsey’s Point & Figure Charting is the like procuring a road map before you begin a journey. It’s a comprehensive look at how to succeed in the markets. This book is not only essential but easy to follow for everyone.” - Paulo Pinto, CEO, Dif Broker
“Point and Figure Charting has become a valuable part of my daily trading routine. As an investment professional, it makes perfect sense to use Tom’s methods in conjunction with fundamental analysis.” - Damion Carufe, Investment Professional
User Ratings and Reviews
5 Stars Not Football (X’s and O’s) but a good Risk Management Tool
Thomas Dorsey is a renowned expert in the arcane craft of Point and Figure charts. To the untrained eye, PnF charts look like football plays with all the X’s and O’s. Developed by Charles Dow, the basic principles have withstood the test of time for many years, much of which pre-dates computer systems and technical analysis software. While you can learn with many online resources, such as StockCharts, you’ll find this book provides an instructive understanding of the theory behind this type of analysis. The strength of PnF lies in the ability to filter out all other noise and focus on the price. In the old days, floor traders only had a price chart to enable them to determine what they would bid or ask for securities. The Bullish Percent indicator, for the NYSE for example, clearly provides an over-arching measure of “risk” in the markets. This indicator simply shows a percentage of those stocks that move into sell or buy signals as a whole. It gives you a barometer of how big or small you should trade or invest. I highly recommend this book to those who want to use PnF charts in their daily repertoire of trading tools.
5 Stars “The trend is your friend!”
While it is difficult to consistently predict future price movements, it is much easier and more profitable to trade in the direction of the primary trend. Point and figure (P&F) charts help one define and identify those trends relevant to one’s trading horizon. What makes this charting method so useful is that its simplification of price reporting makes current market status readily obvious. Whether the market is trending or in a congestion is seldom in doubt.
The simplicity of the P&F method bolsters its robustness in an effective trading program. Not only do price charts readily summarize market status, but other P&F techniques assist in reducing uncertainty. For example, it is possible to derive the likely extent of price movements from horizontal and vertical counts of congestion widths and depths; a bullish percent indicator is absolutely indispensible to successful trading; also, relative strength charting of individual sectors or issues compared to market averages helps answer both investment questions, “what,” and “when.” P&F analysis is useful in trading any vehicle from securities to futures. This was the first charting method used in the US and its use probably dates back to 1885, as per “Kline’s 123 Tread Register.”
Dorsey’s book is a complete exposition of the P&F method. Based upon the prior writings of Ernest Staby, Abe Cohen, and Earl Blumenthal, the method is based upon a “reversal” formula using data readily accessible, as compared to the traditional “point” method of Wyckoff, deVilliers, and Taylor, which required access to tick-by-tick data. This book is well written; the material is presented clearly with many examples; and the method is very helpful in clearing the noise from market analysis.
Free P&F charts are available from stockcharts.com. In particular, I prefer percentage charts which eliminate the “box size” problem and facilitate intermarket comparisons. These percentage P&F charts require an adjustment in calculating horizontal and vertical counts, as follows. In, say, a 2.5%-2 box reversal chart of WTIC, a horizontal count on a congestion stretching from Sep06 through Jul07 has a width of 18 boxes. Multiply this width (18) by the number of boxes in a reversal (2) and this becomes the exponent in the following formula: ((1+percent)^Exponent)*Low price in congestion = Target high price. (For a target low, divide the high price of the congestion by the percent to exponent.) [For WTIC: ((1+.025)^(18*2))*51.34 = 124.89 to 128.01 (bottom of range, 124.89 [calc] * 1.025 = top of range 128.01.] For vertical counts, count unbroken movement from high or low of congestion, multiply by reversal boxes, and use this as exponent for the box range percent. Multiply or divide the high/low price of the congestion be the exponented percentage.
I feel that acquiring familiarity with the P&F method will substantially increase one’s ability to successfully identify and exploit market opportunities as they mature. Dorsey’s work is a great place to start!
5 Stars Tactical Investment Solutions
I am a financial advisor at a very large wirehouse firm. I believe Tom Dorsey’s book, “Point & Figure Charting”, clearly explains his philosophy on how to develop a tactical investment strategy. He has helped me develop a strategy of not only determining “what” to buy, but most importantly “when” to buy. Must read for financial advisors!
5 Stars Point Figure Charting
Great tool for financial planners. My husband has really enjoyed it even through this topsy tervy market.
5 Stars A very sensible approach to investing
The value of this book is much more than learning the technique of Point and Figure charting, although it will certainly do that. Dorsey spends considerable time in explaining his investment strategy, which depends highly on bullish percentage and P&F relative strength charts. His goal is to put the odds in your favor before making a trade based on a clear assessment of the supply/demand situation in the markets. As Jim Cranmer on CNBC says, “There is always a bull market somewhere” and P&F relative strength charts will tell you where it is. If you need to be defensive in your investing, the P&F charts will alert you to do that. This book comes with an instructive CD on the P&F charting and understanding relative strength concepts. A very sensible approach to investing.
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