Point and Figure Charting: A Computational Methodology and Trading Rule Performance in the S&P 500 Futures Market

Abstract

Point and Figure charting is one of the oldest practitioner techniques for analysing price movements in financial markets, yet has received almost no coverage in the academic finance literature. This paper empirically contributes to the existing trading rule literature by providing a methodology for the calculation of Point and Figure charts using ultra-high-frequency data and tests trading rules using eight objective, pre-defined trading rules on US futures contracts. In general it is found that profits were able to be generated during the test period using the Point and Figure methodology.

Keywords: Point and figure, trading rules, ultra-high-frequency data, EMH, technical analysis, futures markets

JEL Classification: C52, C61, C63, G10