How far the price must move to constitute a reversal. The producer should continue to mark his or her chart with Xs and Os until the pattern determines a significant price reversal is occurring. Ultimately, the producer still decides what is significant. Before beginning to chart prices, the user must choose the box size and reversal number. The box size is the amount of price change each box represents.
Producers normally use two to four cents for the box size.
The reversal number indicates how far the price must move opposite to the present trend to become a reversal. The producer changes from Xs to Os or Os to Xs at this point. To begin charting, choose a day when the spread between the high and low represents the reversal. The first column is an O if the close is below the day's midpoint. When prices are moving up, add an X for each two-cent increase in price.