Point & Figure | Box Size | Reversal Count


P&F charts have the added advantage of speeding up or slowing down price, simply by doing 2 things - changing the box size and reversal count of the chart.

Unlike bar/candlesticks charts where changing the unit of time (week to day, day to minute, etc.) is supposed to "speed" up the chart; in doing so, you are just changing the unit of time but will have to accept the OHLC prices for that unit of time. You are not making price more/less sensitive in the chart.

Box Size: Price Range Scaling

The traditional scaling of box sizes for P&F charts uses static box sizing adjusted for the price range of the underlying product:

Price Range (Underlying)        Box Size

Under $0.25                            0.0625

0.26 to 1.00                            0.125

1.01 to 5.00                            0.25

5.01 to 20.00                          0.50

20.01 to 100.00                      1.00

100.01 to 200.00                    2.00

200.01 to 500.00                    4.00

500.01 to 1,000.00                  5.00

1,000.01 to 25,000.00            50.00

25,000.01 and up                 500.00


The majority of retail traders are unlikely to trade an underlying above $500. What is more important for any given product is to ensure sufficient liquid open interest at the specific strikes for which you have constructed a spread – check that there is 10–20 times the number of contracts you plan to fill. Also, if the Index/ETF you plan to trade is stock-settled, check that is has an Average Daily Volume above 500,000. Back to P&F price scaling, the price range for most retail traders would be from $20 to $500 for the underlying with the respective Box Sizes of 1.00, 2.00 and 4.00.
Box Size: Percentage Scaling
❑  Most P&F charting services which allow Percentage scaling typically increases the box size by a constant percentage (1%) every time the price rises above the current box. 
❑  Let's say the underlying Closed at $81.61. With Percentage Scaling the box size will be 1% x $81.61 = 0.82.
StockCharts and Dorsey Wright use both Price Range and Percentage methods for scaling the Box Size. 

My view is using a percentage …  is a truer scaling method because it treats price as a continuous variable for which all price points are valid on a logarithmic scale. 


The traditional method tends to round down or round up decimals and this loses the sensitivity in the box size. Also, the rounding up or rounding down disproportionately compresses or stretches the trend lines and price targets. Percentage scaling is the reliable and accurate method to use. And this is the method adopted by the Home Options Trading process.


There is further refinement of the Percentage Scaling method used by Jeremy du Plessis, author of The Definitive Guide to Point and Figure. 
– Namely, the rounding up/down to even numbers to remove the decimalization in sizing the box, as it adds marginal fractional friction in the box size.  It is pertinent to remember the 'box' represents price and not the line. The next X or O cannot be plotted until the price has reached the next price level, as determined by the chosen scaling of the box size.  So, what Jeremy du Plessis advocates is below. 
Box Size: 1% Rounded Up/Down to Even numbers (Not Odd Numbers/Decimals)
❑  Taking the same prior example of an underlying at $81.61 x 1% = 0.80 rounded down (as 0.82 is closer to 0.80 than it is to 0.90), 0.80 is used as the box size.
n For any decimals in scaling box sizes, round it up/down to the nearest 0.10.
❑  To use this method of refining the percentage scaling in Stockcharts' P&F charts, change the Scaling Method to "User Defined" and type it into the Box Size.

For any of the 3 scaling methods used for the Box Size, a 3-box Reversal Count remains the standard convention. A Reversal Count below 3 is over-sensitive for Indexes/ETFs and a 5-box Reversal Count is too slow.
❑  With P&F charts in StockCharts, change the "Reversal" field to 3.