Readers reviews of TOM DORSEY’S TRADING TIPS

Point and figure charting is one of the secrets of technical analysis. It looks complicated and the screen display is not intuitively easy to understand. Many last analysts skip the point and figure display and move onto more common indicators. They miss an important opportunity to understand the skeleton of the market.

Point and figure is about the pure basics of supply and demand. By removing time from the display, the analyst is shown the balance of supply and demand and is able to quickly pick up changes. I use point and figure as one of the pillars of my trade analysis methods because it filters out so many false and unimportant twitches in price behavior. Dorsey uses the technique in the same way, but as a trigger rather than a confirmation tool.

The basics of point and figure are just a handful – support, resistance and trend lines. With these tools, the market can be stripped down and reassembled. Just as the professional mechanic  uses his tools more effectively than the home mechanic, so too does the professional point and figure analyst  use these tools in a more effective way. The home mechanics follows the manual. The professional knows the manual, and knows what to leave out or modify.

This is the importance of Tom Dorsey’s Trading Tips. It includes over 200 tips, adjustments, fine tuning steps and twists that are never included in the standard point and figure manual. The observations come not just from Tom Dorsey, but from four other point and figure analysts who work with him. Recognizing bullish and bearish patterns is the start of a trading process. To complete a good trade these factors must be combined with a better understanding of market and sectors so that your stock selection improves.

Discovering a trading situation does not mean it is worth trading. A dog is still a dog no matter how tempting the trading pattern may be. Dorsey shows how point and figure is used to create bullish percentage charts to identify the best sectors. Then he shows how to create and use relative strength point and figure charts to assist in selecting the best stocks from each of those sectors. When these twists are applied to the basics point and figure analysis of a stock then we have a more powerful method of stock and trade selection.

Traders who already use point and figure incorporate this analysis method into their trading strategies.

Dorsey’s book provides some new ways to make better use of point and figure beyond the analysis of just a single stock. For new traders who want to explore point and figure charting, this is a good place to start a survey of the possibilities of the method. The early sections of the book provide a background and refresher on the chartcraft point and figure construction  method that Dorsey uses and which is the default method in Metastock.

This book can be ordered direct from Traders Library at discount rates.

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