The Point and Figure View of Selected Markets
Point & Figure Trading Rules
- General Guidelines
- Supply & Demand
- Trend Lines
General Trading Guidelines:
- Only trade long when the commodity is above the bullish support line.
- Only trade short when the commodity is below the bearish resistance line.
- If you are long, remain so until you receive the first sell signal, then stop the position out. If the commodity is still above the bullish support line, repurchase a contract on the next buy signal and stop out on the first sell signal.
- If you are short, remain so until you receive the first buy signal, then stop the position out. If the commodity is still below the bearish resistance line, sell short another contract on the next sell signal.
- Never trade against the trend under any circumstances.
- If the underlying commodity breaks the bullish support line, begin to trade short as the trend is now down.
- If the underlying commodity breaks the bearish resistance line, begin to trade long as the trend is now up.
- Point & Figure chart patterns tend to repeat themselves and thus provide a high degree of predictability about the future move of the underlying commodity.
- Attempt to limit losses to a maximum of 10%.
- Give the trade about 3 days to work in your favor. If it does not work in that time, close the position.
Supply & Demand
The law of supply and demand governs the movement of prices of Commodity Futures. If there are more buyers than sellers, prices rise, on the other hand, when there are more sellers than buyers, prices decline. It is these imbalances in supply and demand that causes prices to move up and down.
The Point & Figure method of analyzing movements is designed simply as a logical, organized way of recording the battle between supply and demand. The Point & Figure charts shows whether supply or demand is winning the battle. Chart patterns and trend lines will guide the buy and sell decisions.
The angle for a bullish support line will always be approximately a 45 degree angle. The bearish resistance line will generally be the reciprocal of the 45 degree angle or a 135 degree angle.
This material has been prepared by a sales or trading employee or agent of Dallas Commodity Company and is, or is in the nature of, a solicitation. This material is not a research report prepared by Dallas Commodity Company's Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.
The risk of loss in trading commodity futures contracts can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. You may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain a position in the commodity futures market.