Bitcoin (BTC) Point and Figure Analysis
Point & Figure charting is the price action traders purist form of analysis. It provides clear entries, exits, and trends. With the choppiness of Bitcoin’s price action, sometimes it is best to view this market with a price-only view.
Point and Figure Charts
Point and Figure charts are one of the oldest styles of technical analysis charting in history. We’re not even sure how they were invented or started. There are some theories and conjectures, but nothing definite – yet. Regardless, it is a form of chart analysis that seems to ebb and flows in its popularity among mainstream traders and investors. It is definitely an odd and confusing type of charting, especially for new traders in the cryptocurrency world – where most new cryptocurrency enthusiasts have learned to read either plain line charts or Japanese candlesticks. And there are a great number of aspiring analysts and traders who prefer to trade as and refer to themselves as, price action traders. But, in my opinion, in order to be a price action trader, you must use a price only style of charting. And Point & Figure charting is the purest form of price action trading around.
If you want to get the best information on how to interpret and trade Point & Figure charts, there is no better book than Jeremy Du Plessis’s, ‘The Definitive Guide to Point and Figure’ (get the 2nd edition). It is a work of genius and is part of the CMT curriculum. Your trading bookshelf is not complete without that book. Without going into too much detail, Point & Figure charts have the following characteristics:
- No time is involved – just price.
- X’s = price moving up.
- O’s = price moving down.
- Each X and O is called a ‘box’, which is a measure of price.
- i.e., for Bitcoin’s chart below, each ‘box’ is worth $100 of movement. So every X = $100 up and each O = $100 down.
- There is a reversal amount that is established for each Point & Figure chart – the most commonly used is a ‘3 box reversal’. In other words, once price moves the opposite direction for 3 boxes, the new column is made.
- i.e., Bitcoin is trading at 5300 and has a column of Xs. In order for a column of O’s to form, Bitcoin would need to move down to 5000 – and then we would see a column of O’s.
- Double and Triple tops/bottoms are easy to identify and trade.
Bitcoin’s current Point & Figure Chart
Bitcoin’s current Point & Figure chart shows one of predictable bullishness. The blue horizontal line on the screen at the 5200 value area is also the 50% Fibonacci retracement from the swing low of 3200 to the first lower swing high at 7200. Notice that the last three columns show an X column, then an O column and finally an X column. The first of those columns shows price stopped at 5200. The current column reached 5200 and created a double top before moving to 5300, which is a clear breakout buy signal. We can also see that the trend line has been broken, retested and then continued higher. According to this chart, Bitcoin has a clear road higher towards 5800 and then finally up towards the 6500 value are before finding some near-term resistance. The nice thing about this style of charting is we just have to set an alert and wait – no looking at candlesticks day after day seeing consolidation over and over and getting anxious about what direction price is moving. With Point & Figure charting, we get the clearest and most stress-free way to analyze and trade this market.