A box that is too small will make the chart too sensitive while one that is too large has the opposite effect. Current price, recent volatility and accepted standards provide the analyst with guidelines for determining the optimum box value. Plotting is based on well defined rules. Horizontal movement reflects trend changes rather than time. In other words, each column can encompass a different amount of days, weeks or even months.
Preference is given to price movements that continue in the direction of the current column.
Point and Figure chart created using Personal Analyst from Trendsetter Software. Trendlines are more easily identified as are many of the chart patterns. The most common point and figure formations are shown in following example with corresponding buy and sell signals identified.