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1989issue C011-10

Constructing percentage-box point-and-figure charts

A proportional point-and-figure chart is built as a percentage contract: convert arithmetic prices into logarithmic equivalents, apply a proportional-box and reversal-count, then read congestion, channels, and support-resistance as percentage structures.

  • An arithmetic-box records a fixed nominal increment, so each X or O is the same currency step at every price level.
  • A proportional-box records a fixed percentage change, so each mark is the same fractional move at every level.
  • The workable construction is logarithmic-conversion of daily, weekly, or monthly prices, then a chosen log box size and reversal-count, rather than repeated rescaling or hand-drawing on semi-log paper.
  • Once boxes are proportional, accumulation and distribution congestion, trendlines, and support-resistance are read as percentage structures, and formations that exist only as small nominal wiggles are filtered out.
Entries in this reading3 entries
Current trackChart scale analysis14 readingsPoint and figure chart56 readingsSupport and resistance227 readings

Sizing each X and O

On an arithmetic point-and-figure chart, each X or O is an arithmetic-box. It records an equal nominal price increment rather than an equal percentage move.

A logarithmic, or proportional, construction sizes each mark as a proportional-box, so every X or O is a constant fractional move.

The illustrated arithmetic triangle chart uses a box of 5 price units, while the illustrated proportional triangle chart uses a 100 percent box on advances and a 50 percent box on declines.

Why the percentage rule comes first

Repeatedly rescaling an arithmetic chart to keep boxes proportional is treated as impractical. The proposed fix is to define box size and reversal-count by a percentage rule from the start.

Hand-drawing on semi-log paper is rejected for this method, because a reversal would be judged as a fixed vertical distance regardless of how many boxes it contains.

How the logarithmic chart is built

Construction converts daily, weekly, or monthly arithmetic prices into logarithmic equivalents, then applies a chosen logarithmic box size. That logarithmic-conversion step replaces arithmetic prices with their log equivalents before the box size is applied.

The vertical axis is not treated as a conventional equal-distance box size, because each step is only large enough to represent a proportional price change.

The implied percentage per box changes if the logarithmic base changes, if the log box size changes at a fixed base, or if the number of boxes required for a reversal changes. Reversal-count is that opposite-box requirement, and it can be varied independently of box size and log base.

Reading congestion and support-resistance

Once boxes are proportional, accumulation and distribution congestion, trendlines, and support-resistance are read as percentage structures. Formations that exist only as small nominal wiggles are filtered out.

Support-resistance, after this grid is built, means demand and supply boundaries taken from those trendlines and congestion zones.

Comparing arithmetic and logarithmic forms

The same market series can be rebuilt in arithmetic and logarithmic point-and-figure form on daily and weekly data so breakouts, congestion, and support-resistance geometry can be compared under the two scales.

That comparison is the chart-scale-analysis in this construction: the formations that survive the change of scale can be isolated from those that appear only on one grid.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
3 of 14 in the Chart scale analysis track
19891-4 pp.Next on Chart scale analysisConstructing point-and-figure objectives across chart scalesPoint-and-figure construction is presented with defined formations, directional signals, trendlines, and countable price objectives after a formation is penetrated.
All readings on this track · 14 readings
  1. 1982Constructing semi-log scales for trend channels
  2. 1988Treat a suspected bend as a construction test
  3. 1989Constructing percentage-box point-and-figure charts
  4. 1989Constructing point-and-figure objectives across chart scales
  5. 1991Unfinished point-and-figure until filter, scale, and pivots measure percent
  6. 1992A logarithmic point-and-figure construction with weekly breadth scores
  7. 1995Constructing a least-squares trend channel with two-standard-deviation rails
  8. 1995Percentage boxes turn a three-box reversal into a scale decision
  9. 2003Log scale trendlines and compound growth
  10. 2007Trendline and channel construction on linear versus log scales
  11. 2012Constructing trend-intensity overlays across chart scales
  12. 2015Index drawdown caps, chart-scale stops, and leverage
  13. 2016Evaluating breakouts by share-price band
  14. 2016Constructing chart scale with a golden-rectangle aspect ratio
By fieldTrend and channels228 readingsBy year1989126 readings
All 14 readings tagged Chart scale analysis
Also on Chart scale analysis5 readings
1989Constructing point-and-figure objectives across chart scales1991Unfinished point-and-figure until filter, scale, and pivots measure percent1992A logarithmic point-and-figure construction with weekly breadth scores1995Percentage boxes turn a three-box reversal into a scale decision2016Constructing chart scale with a golden-rectangle aspect ratio