How to Read and Trade Forex Using Point and Figure Charts

Point and Figure (P&F) charts are among the oldest, most disciplined forms of technical analysis. They strip away time and focus entirely on price movement—offering a geometric simplicity that modern traders often overlook. While candlestick and bar charts dominate today’s trading platforms, professional analysts still rely on P&F to detect trend strength, reversals, and price targets with unmatched clarity. In Forex trading—where noise and false moves are constant—Point and Figure charts allow traders to identify the structure behind volatility.

Unlike time-based charts that record every tick or minute, P&F charts only print when price moves enough to create a new box. This unique structure eliminates insignificant fluctuations and exposes the underlying supply-and-demand balance driving currency markets. It’s not just an old-school relic—it’s a powerful system for traders who value precision, pattern recognition, and rule-based trading decisions.

In this article, we’ll explore the logic, construction, patterns, and applications of Point and Figure charts in the Forex market. We’ll discuss how to interpret the columns of Xs and Os, how to determine box size and reversal amounts, and how to identify breakouts and targets with mathematical confidence. Whether you’re a price-action trader seeking cleaner signals or a system developer looking for rule-based clarity, this guide will show how Point and Figure charts can transform your approach to Forex analysis.

Understanding the Logic Behind Point and Figure Charts

At their core, Point and Figure charts aim to capture the essence of price movement by focusing purely on directional shifts of meaningful magnitude. They discard both time and volume, replacing them with columns of Xs (representing rising prices) and Os (representing falling prices). Each X or O represents a fixed price increment called a box size. When price moves enough to fill another box in the current direction, a new X or O is added. When it moves the opposite way beyond a predefined reversal amount, a new column begins in the opposite symbol.

This approach filters out market noise. In a volatile yet range-bound environment like Forex, P&F charts provide structure by ignoring small fluctuations and recording only significant movement.

Key Principles

• Each X or O represents a set price change, not a period of time.
• Xs are drawn when prices rise by at least one box size.
• Os are drawn when prices fall by at least one box size.
• A reversal column is started when price moves in the opposite direction by a specified number of boxes (usually 3).
• Time does not appear on the chart—the focus is entirely on movement.

This structure makes P&F charts ideal for identifying trends, support and resistance, and breakouts that truly matter.

How to Build a Point and Figure Chart

Building a P&F chart requires three parameters:

• Box size: The value of each price unit (e.g., 10 pips for EUR/USD).
• Reversal amount: The number of boxes required to switch direction (commonly 3).
• Price source: The closing price is typically used in Forex markets.

Let’s look at an example:

Suppose EUR/USD is trading around 1.1000. If we use a box size of 10 pips and a 3-box reversal, here’s how the chart evolves:

• If price rises to 1.1010, we draw one X.
• At 1.1020, a second X is added.
• At 1.1030, a third X appears.
• If price then drops by 30 pips (3 boxes × 10 pips), we start a new column of Os at 1.1000.

Every new column alternates between X and O, building a visual map of supply and demand over time without the clutter of unnecessary detail.

Table: Comparison Between P&F and Traditional Charts

Feature	Point & Figure Chart	Candlestick Chart
Basis	Price movement only	Time and price
Noise Level	Very low	High, shows every fluctuation
Reversals	Defined by box count	Any minor change in direction
Ease of Trend Detection	Extremely clear	Requires interpretation
Best Use Case	Long-term trend and breakout analysis	Intraday timing

Determining the Box Size

Choosing the correct box size is crucial. Too small, and the chart becomes noisy; too large, and meaningful movements disappear. Box size can be determined in three main ways:

• Fixed pip value: Set a static box size (e.g., 10 pips on EUR/USD) for simplicity.
• Volatility-based: Adjust box size according to the pair’s recent ATR (Average True Range). A common formula is Box Size = 0.25 × ATR(14).
• Percentage-based: Use a percentage of the instrument’s price (e.g., 0.1% per box for high-value pairs).

Volatility-based sizing often provides better scaling across multiple Forex pairs since volatility differs dramatically between USD/JPY and GBP/NZD.

Understanding the 3-Box Reversal Rule

The “three-box reversal” is the backbone of Point and Figure charting. It prevents overreaction to small pullbacks. For instance, with a 10-pip box size, price must reverse by 30 pips before switching columns. This ensures that only substantial changes in sentiment are reflected.

More aggressive traders may use a 1-box or 2-box reversal for early entries, while longer-term traders prefer 3-box or even 5-box reversals for clearer trends.

Reading a Point and Figure Chart

Each column of Xs or Os reflects a directional campaign—either demand (buying) or supply (selling). Here’s how to interpret them:

• Uptrend: Series of rising columns of Xs, with each column reaching higher highs.
• Downtrend: Series of falling columns of Os, with each column reaching lower lows.
• Support: Horizontal zone where multiple O columns bottom at similar levels.
• Resistance: Horizontal zone where X columns peak repeatedly at the same level.

This structure gives traders a clean visual of trend, reversal, and accumulation zones that might be buried in time-based noise.

Advantages of Point and Figure Charts in Forex

• Noise Reduction: Ignores minor fluctuations and highlights meaningful trends.
• Rule-Based Trading: Eliminates emotion by following predefined box and reversal sizes.
• Clear Support/Resistance: Levels are unambiguous and visually aligned.
• Built-In Risk Management: Patterns define logical stop levels.
• Timeless Analysis: Works across all timeframes and volatility regimes.

Limitations of Point and Figure Charts

• No Time Component: You can’t tell when moves occurred.
• Lag on Reversals: Waiting for multi-box confirmation delays entries.
• Complex for New Traders: Requires practice to interpret correctly.
• Less Suitable for Scalping: Focuses on structure, not rapid execution.

Popular Point and Figure Patterns

1. Double Top Breakout

Occurs when a new X column exceeds the high of a previous X column by one box. It signals fresh buying momentum and trend continuation.

2. Double Bottom Breakdown

Formed when a new O column drops below the low of a previous O column by one box—indicating renewed selling pressure.

3. Bullish Catapult

Begins with a double top breakout, followed by a minor pullback (O column), then another breakout. This pattern signals strong continuation potential.

4. Bearish Catapult

Mirror image of the bullish catapult: breakdown, slight pullback, and another breakdown. Used to identify strong downtrend continuation.

5. Triple Top/Bottom

When price tests a level three times before breaking through, it represents a major breakout zone—highly reliable in Forex pairs with long consolidations.

Combining Point and Figure with Technical Indicators

Though P&F is self-sufficient, traders often blend it with traditional indicators for confirmation:

• Moving Averages: Overlaying an EMA on a P&F chart helps filter direction bias.
• RSI: Helps identify overbought or oversold conditions before breakout patterns.
• ATR: Adjusts box sizes dynamically based on volatility.

Table: Comparison of Box Sizes and Strategies

Box Size	Reversal	Style	Typical Use
5 pips	1-box	Scalping	Short-term trades, tight stops
10 pips	3-box	Swing Trading	Identifying trend continuation setups
25 pips	3-box	Position Trading	Long-term breakouts

Using Point and Figure for Breakouts in Forex

P&F excels at isolating real breakouts from false ones. Because each breakout requires a confirmed price move of multiple boxes, fake moves are filtered out. To trade breakouts:

• Wait for a column of Xs or Os to break a previous top/bottom.
• Confirm with at least one additional box beyond the breakout level.
• Place stops one reversal below/above the breakout level.

This method works exceptionally well for trending pairs like GBP/USD or USD/JPY during London and New York sessions when liquidity is highest.

Calculating Price Targets Using Point and Figure

Price targets in P&F are projected using the horizontal count method or vertical count method:

• Horizontal Count: Measure the width of the pattern (in boxes) and multiply by the box size to project the breakout target.
• Vertical Count: Measure the height (in boxes) of the first column in the breakout formation, multiply by the box size, and adjust for reversal size.

For example, if a triple-top pattern is six boxes wide with a 10-pip box size, the target is approximately 60 pips above the breakout point.

Integrating Point and Figure with Price Action

P&F is a bridge between price action and quantitative systems. It visualizes structure (support, resistance, breakout) without time distortion. Many professional traders combine it with supply-demand zones from candlestick charts to confirm entries. A breakout on P&F aligning with a bullish engulfing pattern on the 1-hour chart, for example, strengthens confidence in the setup.

Backtesting Point and Figure Systems

Because P&F is price-based, backtesting requires tick or range data to reconstruct accurate box formations. Simplistic backtests using bar closes often misrepresent performance. Traders should ensure their backtesting environment replicates real movement granularity and reversal logic. When done correctly, P&F systems can be robust, rule-driven, and surprisingly durable across market regimes.

Conclusion

Point and Figure charts may seem old-fashioned in an age of digital algorithms and instant news, but their logic is timeless. They isolate what truly moves markets—sustained imbalances between buyers and sellers. For Forex traders, where volatility and noise are daily companions, P&F charts offer structure, discipline, and visual precision. They force traders to think in terms of thresholds and reversals, not emotional reactions to every tick.

Mastering P&F requires patience and rule-based execution. Once understood, it becomes more than a chart—it’s a map of conviction. When used alongside proper risk management and contextual awareness of volatility, it becomes a professional’s instrument for cutting through chaos. In the end, the simplicity of columns and boxes hides a deep truth: markets may evolve, but human behavior—the patterns of buying and selling pressure—remains the same.

 

 

 

Frequently Asked Questions

What makes Point and Figure charts different from candlestick charts?

P&F charts ignore time and focus purely on price movement, using Xs and Os to show trends and reversals instead of candles formed every fixed period.

What box size and reversal should I use for Forex?

Start with a 10-pip box size and a 3-box reversal for major pairs. Adjust based on volatility or test ATR-based sizing for dynamic scaling.

Can I use Point and Figure charts for intraday trading?

Yes, though they are better for swing and position trading. Smaller box sizes (5 pips or less) can make them suitable for shorter timeframes.

How do I identify breakouts with Point and Figure?

Watch for double or triple top/bottom formations breaking previous levels. Confirm the breakout with an additional box and place stops one reversal away.

Do Point and Figure charts work with indicators?

Yes. Moving averages, RSI, and ATR can complement P&F by confirming direction or adjusting box size dynamically.

What are the biggest advantages of using P&F in Forex?

Clarity of trend, objective breakouts, built-in risk control, and noise elimination. P&F helps traders focus on meaningful structure.

Is Point and Figure outdated?

Not at all. Its mathematical simplicity and psychological accuracy make it as relevant today as it was a century ago, especially in high-volatility markets.