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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.
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 Dorseys 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.
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.
already use point and figure incorporate this analysis method into their trading
Dorseys 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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