STOCK GOODIES PLAYS OF THE WEEK

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Creating a P&F Chart

On a P&F chart, price movements are represented with rising X-Columns and falling O-Columns. Each column represents an uptrend or a downtrend of sorts. Each X or O occupies what is called a box on the chart. Each chart has a setting called the Box Size, which defines the price range for each box.

Each chart has a second setting called the Reversal Amount that determines the amount that a stock needs to move in the opposite direction to warrant a column reversal. Whenever this reversal threshold is crossed, a new column is started right next to the previous one, only moving in the opposite direction.



The "reversal distance" is the box size multiplied by the reversal amount. A box size of 1 and the reversal amount of 3 would require a 3 point move to warrant a reversal (1 x 3). An X-Column extends as long as price does not move down more than the "reversal distance". Similarly, a stock in a downtrend will cause a descending O-Column to appear. Only when the stock changes direction by more than the reversal distance will a new X-column be added to the chart.