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While most charts used in technical analysis have a vertical axis corresponding to price and a horizontal one that shows time, there is a useful chart that does away with the time x-axis. This might at first seem strange, but the design of the chart means that it captures the important price trends without them being masked by the inevitable ‘noise’ of small and inconsequential price movements that all too often fog the picture. This type of chart is referred to as a ‘Point and Figure’ chart and is constructed using sequential columns of zeros and Xs. During a rising trend a column of Xs is gradually built up by adding an X to the top of the last column at the right-hand edge of the chart as price moves up by the interval of the box value. If price activity starts to fall off, a new column is started and zeros are gradually entered into a descending column. The key to the sensitivity of the chart is the box size or the price move necessary to add an X or zero and the number of boxes that a price move must reverse before a new column is started. By playing around with these values it is possible to engineer out all but the most important price moves and in doing so price patterns can be more clearly seen. Trading with a P&F chart can be a successful strategy as they automatically give both levels of support and resistance and signal when a trend has completed.

Furthermore, they can be used to generate possible targets for moves by counting preceding columns and using this measure to give a target level. Two types of counting are most commonly used. For example, a vertical count uses the first column of Xs that develops following low. By multiplying the number of Xs by the box size and the number of boxes needed for a reversal you can obtain the size of the expected move for the newly established up trend. A similar process is used for down moves by using the first column of zeros following a top. Horizontal counts are made by measuring the number of consecutive filled in columns at a top or bottom and then similarly multiplying by the box size and the number of boxes needed for a reversal. This is the value of the move so add or subtract it from the breakout point to gain the target level.

Trend lines on P&F charts are always drawn at 45 degrees, either rising or falling from a preceding turning point low or high. Because these lines only need this turning point and do not require a second point to define the slope of the line, they can provide early levels of support and resistance in a new move. While prices remain above such a line they can be said to be in a long-term up trend and vice versa for bear trend lines.