Someone recently ask me why I use Point & Figure Charting over all of the other forms of technical analysis. I think you can boil it down to just a few salient points: simplicity and it works for the type of trading and investing that I do.

Point & Figure (P&F) charting is a method of technical analysis that has been in use for more than 100 years. After a number of years on the shelf it’s once again gaining in popularity. It’s probably one of the most unique charting systems that you’ll ever encounter.

At first glance, a P&F chart looks like a real mess. “Gibberish" is a good word that comes to mind. How in the world can anyone make sense out of all of those “Xs" and “Os"?

I know the first time I looked at a P&F chart I couldn’t make heads or tails out of it. To say that I was confused was an understatement. After 30 minutes or so of study, I was hooked. And you will be too!

A P&F chart is nothing more than a picture of supply and demand. Think back to Economics 101. What’s the first thing that we all learned? Supply and Demand must be equal.

When demand for something is greater than the existing supply, prices rise. On our chart rising prices are represented by a column of Xs.

When the supply of a particular item is greater than the demand for it, prices fall. On our chart falling prices are represented by a column of Os.

The chart is put together using alternating columns of Xs and Os. This is just the ebb and flow of supply and demand.

Probably the most unique feature of the chart is how time is depicted. It isn’t. Time is not a factor when it comes to supply and demand. The direction changes when it changes.

Simplicity is the essence and beauty of P&F charting.

P& F charting offers a trader/investor several advantages:

1. Support and resistance levels are easily recognized

2. Trend lines are a virtual no-brainer. What is “is"

3. Chart patterns are easy to interpret

4. No noise. To me, this is one of the most important advantages. Insignificant price movements have been eliminated. On a bar or candlestick chart, irrelevant prices movements clog up the chart and this “noise" can lead to a misinterpretation of the chart.

5. I like to post my charts by hand because it gives me a better “feel" for what is going on in the market. Because of the type of charting that I am doing, P&F charting allows me to follow a large number of stocks, sectors and indices.

At the end of the day, you have to be comfortable with the system you are using. I’ve been a P&F guy for about 30 years. Simple and Reliable – it doesn’t get much better than that.

R.A. "Casey" Christy
The Stock Trading Advisor

R.A "Casey" Christy is a professional stock trader, author and recognized authority on technical analysis. His web site, http://www.stock-trading-advisor.com, contains a wealth of information, articles and resources on everything you’ll ever need to know about trading stocks. If you’re really serious about making money in the stock market, you ned to learn to trade the way the "pros" do.