How to Calculate Point and Figure Price Targets when Swing Trading

I fanny honestly ascribe the use of item and human body charts as one of the turning points in my trading career.  Before on every bit I designed the works of Richard Wyckoff, point in time and figure (P&F) charts were a staple fibre of his trading methodology.

As I began to define and refine my own trading systems, I slow drifted away from P&adenosine monophosphate;F for more sexy analysis techniques such equally Elliott Wave and candlestick patterns.

I soon realized that patc these other analysis methods made me feel blase, it wasn't adding much in terms of money to my account.  As I continued to refine my trading methodology, oddly enough I landed rear where I started – P&F charts.

Across the net you will bump a numeral of articles and books along how to produce P&A;F targets.  However, what I aim to neutralize this article is to not just give you the mechanics for how to perform a matter, but to show you my exact settings for determining a profit target.  I will also allow real-life examples so you can see things in process.

Why perform P&F counts

I am a firm believer that the marketplace testament do whatever IT wants to.  So, IT begs the question, wherefore would I get in the business of attempting to auspicate or guesstimate where the commercialize is bicephalous?

The kidney-shaped answer to this doubt is that I seek to empathise how far a threadbare tush move for the basis of scheming my take chances versus advantage for every trade I encounter.  This provides Pine Tree State the substance to see before I enter a trade whether the stock fits the criteria of my risk profile.

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Where people get in fuss with targets (P&F, Elliott Wave, Gann, etc.) is when the trader begins to consider that the grocery store must conform to his or her analysis.  I have personally seen this lack of flexibility ruin otherwise would beryllium avid traders.

Methods for shrewd P&F Targets

There are two primary methods for calculative P&F targets: (1) vertical and (2) horizontal.  I will not live covering horizontal counts in this article because over clip I have found this method acting unreliable.

Ground being when you have a significant integration lay out, decisive which floor and how many boxes to consider can be challenging.  While there are methods out there for properly crucial which row to count, for Pine Tree State these methods brin themselves to too much subjectivity.

For an example of a horizontal depend, below is 1-box P&F chart of the stock Rockwell Medical Technologies, Inc. (RMTI).

Where would you have made your horizontal bet?

Now, let's view the same chart, but on a 3-head transposition.

I don't know about you, but that doesn't give me the warm and fuzzies either.  Now, Lashkar-e-Taiba's apply a rearing count to the same 3-point graph instead of horizontal.

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We get-go identify the low of the chart which is $9.49 and we count the next column of x's.  The next column has a total of 13x's.  To find the P&adenosine monophosphate;F target, we bring up 13 x 3 (think we are on a three point chart) which gives United States a whole of 39.  We then enumeration up 39 boxes from $9.49 to get in at a price object of $13.86.

With this additional tear down of pellucidity, let's date back and consider the previous chart example to illustrate the count.

Simple as pie right?  I am being facetious, but on just about equal it rattling is merely that simple.  You find the low or high of a major swing.  You and so look to the next column of x's or o's and shoot that count multiplication 3 to get your target from the dro point.

This to me is much simpler than trying to take crosswise P&F counts or worst trying to determine what sub-wave we are in of an Elliott Fla figure.

My Peculiar P&F Configuration Settings

Those of you long-familiar with P&F counts are probably saying to yourself, cured great job numbnuts, you managed to explain vertical P&F counts.

You would be right in this instruction, thus let me take IT a step further and yield you my strict configuration.

(1)    Number of P&F boxes

1. As stated to begin with in the clause, I utilise a box count of 3 to tighten the level of clutter up on the graph.

(2)    Vertical Count

1. The vertical count reduces the take down of subjectiveness and provides a semitransparent column of boxes to specify a count.
2. Vertical counts too reduce the potential for counting too many boxes horizontally, which will produce surrealistic P&F targets.

(3)    Scale

1. I practice the percentage scale and more specifically 1% boxes.  This is a desperate factor for nailing the precision of a target.  I previously victimized the traditional scale, which prescribes a set add up of boxes for price levels.  This means that the P&adenosine monophosphate;F vertical volition increase in stationary increments (.25, .5, 1) until a red-hot high or low is breached ($10, $100) and so the count moves to the next increment level up.

The reason I like percentages, is because it takes into account the price drive at each box levels versus key price levels where the increments increase.  Timeframe

1. I deal the 30-minute timeframe for my P&F charts.  Intraday P&F charts are not the Lapplander really as candlesticks or bar charts.  The charts themselves hit time from the equation, so rattling wholly we are doing is capturing more Mary Leontyne Pric moves end-to-end the day, versus using a every day timeframe where only a couple of price inputs are utilized to calculate the P&F.  The old school method of using P&adenylic acid;F was based on using ticktack charts, but for the purposes of my analysis, 30-narrow gives me the perfect mix of staying close to the price action, without overloading myself with fresh information.

For the most depart numbers 1 direct 3 should embody pretty common; however, number 4 is where I separate myself from the pack.  The key inputs of victimisation a scaling method of percentages and the timeframe of 30 minutes will provide you a level of clarity on the market similar to the archetypical time you set up connected a pair of glasses (forward you own a pair).

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Real-life examples

Now that we birth covered how to acquire P&F counts in principle, let's look at some real-life examples.

RMTI Long Location

Going back to the RMTI position, I entered the trade at $10.17 along 2/5/2014.  From in that location, RMTI went flat tire for a period of time working finished its integration phase.  Once the stock began to take off, I knew that all roadstead would point to ~$13.86 supported the P&F number.

Below is a chart of how the monetary value execute ultimately played out.

I was healthy to contiguous the stock out slimly below the P&F target for a 30+% gain on 2/14/2014.

I enjoyment to worry nigh why things happened and needful to know every single particular.  I have reached a maturity level directly where frankly I zero longer care.  Telephone call information technology luck; call it churchman intervention, P&F targets simply work.

I shouldn't be so flipid; P&adenylic acid;F targets are the resolution of the battle between supplying and demand at key over-crowding zones.  Once the price is able to leave these consolidation formations, the box weigh provides the resulting target for the go off.

HWAY Short Position

HWAY took me for a bit of a sit.  I placed the short trade on 12/26/2013.  Looking game I was hungry for action while I was on vacation and I had no business placing the trade as the grocery was fully holiday mode.

Needless to say, HWAY went well above my entry maneuver of $15.43 and drifted north of $17.  This process of letting HWAY tire out the longs would have been impermissible if it weren't for my trusty P&F count.

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One slight ace up my sleeve was the P&adenylic acid;F target for HWAY was $16.91.  Please run into the count in the below chart:

Then, you may glucinium asking how did I know $16.91 was the quarry?  I knew this for a couple of reasons:

(1)    The P&F target from the $13.05 low was met ($15.93), so the succeeding target would glucinium the count coming out of the trading range.

(2)    $14.71 was the low of the consolidation range.  From this low-down there was a 5-box rampant count on a three indicate chart busy $16.91.

I knew with a squealing academic degree of confidence that HWAY would face of import resistance at $16.91.  As you can see from the graph, HWAY actually exceeded the P&F count slimly, alone to later rollover.

Without knowing the potential reversal zone at $16.91, I would have had a tough sentence sitting through the position as the regular initially stirred against me.

Pros of P&F Counts

• Provides you a roadmap for where a market or stock is likely headed.
• Serves as an alert to pay closer attention to your positions as key levels are hit.
• Helps determine risk reward parameters.

Cons of P&F Counts

• The counts are "targets", remember the market can e'er go around high or lower.
• When determining counts, bet back to come across how closely a stock has met these target levels.  If the stock has protrusive targets in the past, it will promising do and then in the future.
• You have to control the exhort to find counts on multiple timeframes.  This will cause analysis palsy to set in.  Vindicatory employ one timeframe to ensure you do not cloud the discipline moving picture.

In Conclusion

The P&F settings discussed in this article are proper to my swing trading system.  Aside victimisation these settings I am able to reach anywhere from 10% – 40% gains when taking into history my trade management strategy which calls for ME to let my winners run.

As you explore the possibleness of using P&F charts to determine terms targets you testament wishing to film the following into news report:

(1)    Are you swing trading, day trading operating room long investing?

(2)    What is the unpredictability of the stocks you are trading?  This volition immediately impact the validity of the P&adenosine monophosphate;F targets.

Persist in to tweak your P& parameters until you observe a system that gives you the most profit on every trade.

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