Ask Colin

In your book you say you used to keep point and figure charts, but no longer. What do you think of them now?

If I did not have a computer, I would still be using point and figure charts, because they are the easiest and fastest way to keep track of lots of stocks.

 

However, the computer enables us to utilise any form of chart almost instantly created for any number of stocks.

 

Point and Figure charts also have a great advantage in that they cut out some detail and show the basic price picture. For that they are still valuable.

 

However, most charting packages do not display point and figure charts very well and some even draw them incorrectly. The problem is similar to candlestick charts – as soon as you need to display a lot of data, the chart form takes up too many pixels. The candles run into each other and the point and figure charts run along the bottom of the chart trying to keep the boxes square. Some have solved this by distorting the boxes – a compromise that is unsatisfactory.

 

There is also much more information on bar chart than a point and figure chart. This is not always an advantage, but switching to weekly and monthly formats does go a long way towards comparability to the filtering aspect of point and figure.

 

As I said in the book, the factors that swung it for me were that bar charts are easier to teach from and I found that I could still see the same patterns on the bar charts as I saw on point and figure charts.

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