P&F Scaling and Time Zones
While daily P&F charts are best suited for long-term analysis, intraday intervals are often needed to maintain a medium-term view. The next analytical step will be to further reduce the (short term) range and box size. A 15 minute chart using a box size of .25% will cover approximately one month's data for many securities. Beginning the analysis with the longest return period allows mappers to identify the larger trend. Keep this in mind as you move to shorter times. Trading results can be improved by looking for short term bullish setups when the long-term trend rises. The settings shown above mean general guidelines. Chartists should configure their P&F charts to suit their trading style.
Although intraday charts are normally associated with short-term analysis, cartographers may be surprised by how far intraday data can stretch back in Point and Figure charts. It is this extension of time towards the past that determines the analytical time frame. Generally, charts dating back just one month will be short-term. Charts extending several months will mostly be medium term. Charts longer than a year will be suitable for long term analysis. The amount of historical data shown in a Point and Figure chart is not fixed. Instead, this review time depends on the number of price reversals, which in turn are affected by the box size, reversal amount and data range. This article will show you a few different P&F settings to help graphic artists choose the time frame that best suits their analysis.
Before moving on to intraday data, it's important to understand the difference in P&F pricing methodologies. There are two pricing methods available: the High-Low Method and the Close Method. Each method uses only one price point. Obviously, the Close Method only uses the closing price. The High-Low Method uses highs or lows, but not both. Sometimes both are ignored. Here are the guidelines for the high-low method.
When the current column is a column of X's (progress):
Use the high when another X can be drawn and then ignore the low one.
Use low when another X cannot be drawn and the low will trigger a 3-box reversal.
Ignore both when the high does not warrant another X and the low does not trigger the 3-box inversion.
If the current column is a (drop) column of O's:
Use low when another O can be drawn and then ignore the high one.
Use high when another O fails to pull and the high triggers the 3-box inversion.
Ignore both when the low doesn't require another O and the high doesn't trigger the 3-box inversion.
With only one data point used in the High-Low Method, it is possible to exclude some important data on the table, or more precisely, off the chart. Using intraday data helps solve this problem. There is about 6.5 hours on a normal trading day on the NYSE and Nasdaq. This is the 7 sixty-minute period, the 13 thirty-minute period, the 39 ten-minute period, etc. It means it will. Using the High-Low Method in intraday periods will capture more price movements than the High-Low Method using daily data. A 60-minute chart uses 7 data points per day, even with the High-Low Method. The high-low interval is used for every 60 minutes. This means that significant swings, highs or lows cannot be missed.
3-9 Month Charts
While intraday data are often associated with short term charts, intraday ranges often produce good mid term P&F charts. Of course, short-term, medium-term and long-term definitions depend on your trading or investment style. Changing from a log to a 60 minute interval and from a 1% box size to a 50% box size will reduce the time covered in the chart and increase accuracy. In most cases, these charts will stretch 3-9 months and this covers the medium term time frame for many traders. The P&F charts below show Urban Outfitters and VF Corp. against 60-minute data and .50% per box.