Point and Figure – Next Steps and Continuous Learning

Hey everyone, welcome back to our Point & Figure chart series here at Interactive Brokers. This time, we’ll walk you through how to actually set up Point & Figure charts right inside the Trader Workstation (TWS) platform. Let’s jump right in!

Getting Started

Open a Chart: Pull up any symbol in TWS, for example, SPY (the S&P 500 ETF).
Access the Settings: You can double-click on the X’s and O’s, click the three dots next to the chart, or head to the gear icon to bring up your chart settings.

Box Size

Traditional (Dollar Value): You specify a fixed dollar amount (e.g., $2, $5, etc.). Each time the price moves that amount (in an up or down direction), you print a new X or O.
ATR (Average True Range): This automatically adjusts the box size based on how volatile the stock normally is. Great if you’re cycling through various stocks with different price ranges.

Reversal Amount

If you’ve set a box size of $5, for example, and a reversal amount of 3, you need a $15 move in the opposite direction to switch from X’s to O’s (or vice versa).
If you’re using ATR, this applies similarly—if the reversal is set to 2 or 3 times the ATR, that’s the threshold needed to flip columns.

Source (Close vs. High/Low)

Close: The chart updates based on closing price moves.
High/Low: The chart updates when price breaks above the last high or below the last low. This generally prints more X’s/O’s and can capture more intra-bar moves.

Colors & Other Visual Options

Up bars (X’s) can be any color you like, same with down bars (O’s).
Projection bars show where the chart might print a new X or O, depending on whether price confirms the move.

Practical Tips for Choosing Box Size

Avoid Too Much Data: If you pick a very large box size on a lower-priced or less volatile stock, you might hardly see any new columns print.
Avoid Too Little Data: If your box size is too small for a high-priced or very volatile stock, you’ll get overwhelmed with tiny moves.
ATR Method: A great “set it and forget it” approach. ATR-based box sizes automatically scale to the instrument’s volatility.

Why Bother?

The biggest advantage with Point & Figure is you won’t get stuck reacting to every minor price wiggle. It’s all about meaningful price moves:

Time-Agnostic: Doesn’t matter if it takes a day or a year to print that next X or O—you only see updates when the price moves enough to actually matter.
Clear Entries & Exits: Combine your personal bias—whether fundamental, macro, or long-term technical—and let the Point & Figure chart give you a noise-free timing mechanism.
Consistent, Simple Settings: Whether you’re setting a manual box size or using ATR, once you find your sweet spot, you’ll know exactly when to step in or step out.

Next Steps

Experiment: Play around with a couple different box sizes (or ATR values) for each security on your watchlist.
Mark Key Levels: Draw trendlines or support/resistance lines right on your Point & Figure chart.
Set Alerts: In TWS, you can also set price alerts, so you’re notified when it’s about to flip from X’s to O’s or vice versa.

Bottom line: Setting up Point & Figure charts in TWS is straightforward—just a few tweaks for box size, reversal amount, and color scheme, and you’re good to go. Once you’ve got it dialed in, you’ll be able to focus on bigger-picture price moves and make more confident trading decisions without all the noise.

Thanks for tuning in, and we’ll see you next time for more tips and techniques on Point & Figure charts here at Interactive Brokers!

Contributor

Michael Nauss, CMT

Substack:  www.statsedgetrading.com