A point and figure commodity charts is used for technical analysis of securities. Unlike many other investment charts, point and figure commodity charts do not represent a linear representation of time. They instead, show trends in price.
The aim of point and figure commodity charting is to filter out the unimportant price movement and focus on the true direction of the price trend.
Point and figure commodity charts are usually used for a longer-term price movement. Having said that, they can also be used to day trade by clearly identifying the key points of demand and supply. They are also very effective at keeping you on the correct side of the market. Point and figure commodity charts can do a really great job to spot some really good trading opportunities on a trade and trend market. Point and figure commodity charts are close relatives to three-line break, renko and kagi charts, which do not have a fixed time frame. This will make you trade only the important moves of the market; small moves are discarded because of the limited gain potential.
There are two typical ways to plot point and figure commodity charts, using closing prices, or with high/low prices. The most common method in today’s market is high/low prices of a specific period usually daily price. The close (EOD) method was also used until 1947 when A.W. Cohen invented a new system to work with point and figure commodity charts using high/low prices. A.W. Cohen also invented in 1955, the bullish percent indicator BP. A tool to gauge the market breadth of a particular market or index.
Today, Chart craft is Investors Intelligence. Website Investors intelligence was used for the calculation of the BP high/low prices of the day because of the fact he invented the high/low system on point and figure commodity charts. However, it is also possible to calculate the BP with close only prices but the outcome became two different BP charts.
Closing prices are very useful when charting price movement for funds or suchlike where there are no real ways to get the intraday prices for that fund. Nevertheless, we can use the close only prices for every kind of market because the intraday movement of prices can be very confusing. If you take into account that point and figure commodity charting in the last parts of the 19th century and the first parts of the 20th century was used to record price movement of tick charts, the close only price would be one tick. Specifically our last tick for the trading day.