"The key to P&F charts is the establishment of the unit of price, which is the unit measurement of a price movement that is plotted on the graph.
On P&F charts, there is no time axis, only a price axis. Rising stock prices are shown with X's and falling prices are shown with O's. These points appear on the chart only if the price moved at least one unit of price in either direction.
So say the closing prices of a stock moved up one price unit three times. This would appear as a column of three X's. If the price movement reverses direction, the chart shows a new column of O's, wherein an O is plotted for each unit of price movement. X's and O's never appear in the same column. The chartist, however, must establish how many price units make up a box, which is how much the price must move in the opposite direction for the chart to begin a new column.
Let's say, for an example, the stock you were tracking was trading at $25, and you were using a $1 unit measurement and a reversal box is three units. Now, if the stock had been trading upward to $25, the stock would have to close at $22 before the chart would reverse to a column of O's. Because each unit of price movement must be plotted, each unit of price movement down from the $25 level must, in this new column of O's, be represented by one O. The next reversal would have the stock trading up at least $3, or three points, before a new column of X's came back into view on our P&F chart. Assume then that the issue continues to fall to $20 before reversing itself; the X's would reappear once the price hits $23. Remember, you choose the unit size. It could be $0.50, $1 or even $2 if the stock price is high enough. Graphically, the first two columns of our example would look like this:
$25.00 X
$24.00 XO
$23.00 XO
$22.00 XO
$21.00 X
"
^------------- Simple example I found
So MO modified P & F, your X axis is actually TIME? Like a 1 hour or 3 hour unit of time?
So a box that is colored but contains no "X" or "O" is a wick?
Why do some boxes have no color?
"Do you see why I am interested in P&F?"
I SEE better S & R with less noise in between.
AND
Places to possibly consider an entry.
Thank you for the previous examples.
