Comparing the Point-and-Figure charts to the conventional candlesticks (or bar and similar), the P&F comes out clean and smooth while the jagged movements of the regular charts can and do force traders to trade erratically and even overtrade. Because time is not an essential element, only prices dictate the charts.

The second objective is to learn how to read it. Since there are only X’s and O’s, the logic is quite simple, the next task to incorporate trendlines and patterns to get a clearer idea what the price action is really show. Since the charts are smoothed out, the simple trendlines will do well in signaling an on-going trend or a reversal ahead, similar to conventional charting. If prices in the current column move higher than the last column, then a breakout to the upside is taking place; if prices move lower than the last column, then a breakout to the downside is taking place.

This one advantage from P&F charts: support and resistance, horizontal or angled trendlines are clearly located and marked. This simplifies trading and avoids confusion when it comes to making a decision to enter or exit or do neither.

The next article, the topic on entering and exiting the trades using P&F will be extensively discussed.