The History of Point and Figure Charts

March 28, 2008

The History of Point and Figure Charts

Filed under: Learn Point and Figure — cody @ 7:44 am

No one knows exactly where Point and Figure charts originated or who invented them. Charles Dow, nineteenth century Wall Street Journal editor and Dow Jones & Company co-founder, is most often credited for developing the point and figure method.

In 1901 he wrote an editorial in the Wall Street Journal describing what he called the Book method because it was plotted from the ticker, often referred to as the market book. The first Point and Figure looked something like this:

The above chart was called a “figure chart” as it placed each figure (number) in the box as the price increased or decreased in value. This method became very difficult as it was almost impossible to use if you wanted to use 1/2 figure charts as you would have to put 10, 10 1/2, 11, 11 1/2, 12, 12 1/2… This made the chart both difficult to read and tedious to write out.

To simplify the chart it changed into a “point chart” which instead of listing each number only used an “X” for each row while having the value placed on the left side. This made charting much quicker and also much easier if you wanted to use a value other than a whole number.

The next evolution was to combine the “figure chart” and the “point chart” to create a chart which placed a five (5) and a zero (0) in place of an “X” so that it was easier to keep track of the price as it moved.

This is believed to be how the name “Point and Figure Chart” came about.

It was not until A.W. Cohen’s book in 1947 How to use the Three Point Reversal Method of Point and Figure Stock Market Trading that the use of “X” and “O” are both used. The “X’s” indicated price going up and the “O’s” showed when price was going down. This is how a Point and Figure chart is now created.