Thursday, March 24, 2011

PnF Chart My 0.2 Cent Review - Part IV

In the last session we have seen the significance of box in P&F charting. In this write-up we try to see the effect of reversal points.


Reversal is the number of boxes (points) the price has to turn back to initiate a new column. As the name suggests "reversal" implies a change in the current trend. So a running column of "X" will shift to a new column of "O" if the reversal gets triggered. Like box-size the value of reversal is also something debatable and comes often with experience.

Reversal therefore can be 1-point, 2-point, 3-point as many as one wants to keep. A long-term player will always go for a higher value reversal compared to an aggressive trader. However, box in my opinion can be decided independently but reversal is quite dependent on box-size. It's important to have complete understanding of the box size before picking-up the reversal points. Therefore, the reversal point is very important to decide in any chart. Wyckoff used 1-point reversal for his charts. Whereas other great proponents of the art have suggested a standard 3-point reversal.

I personally feel 3-point reversal works well in Indian environment. Different phases of the life-cycle of the stock can have different reversal points. When a scrip is going through the phases of consolidation / correction a higher reversal will help avoid getting into the traps of whipsaws. Whereas when in momentum a lighter reversal point helps trail and lock the profit before it's too late.

In the next write-up we would see an interesting and perhaps the most stand-alone characteristics of the P&F chart - price objective.

I see many people visit the page. Would encourage more participation in terms of sharing knowledge


  1. @Rajib
    Of the handful I visit, your blog is one.
    One of cardinal rules of PnF charts is to draw Support and Resistance Lines at 45 degrees angle only. You seem to follow this rarely. Any particular reason for deviation.

  2. @ alphabet1,

    You are right 45deg lines are treated as Ultimate Bullish Support Line & Bearish Resistance Line ... breaking them indicates the Ultimate trend reversal.

    However, I have also found that better channeling happens in P&F compared to any other forms of charting technique. And break of them often presages the reversal much earlier than 45eg line. Hence, I first lookout for a relevant channel through different box sizes.