Author(s)

J.A. Anderson

Abstract

This paper outlines a formal computational methodology to the well-known financial analyst’s/trader’s tool of Point and Figure charting. This paper provides a step-by-step guide to its computation including the handling of different ‘reversal sizes’ that are central to the Point and Figure approach to data representation. The manner in which Point and Figure charting allows various reversal sizes creates an issue with respect to the length of ‘runs’ expected under tests of market randomness. This paper resolves this issue for the first time by providing equations to compare the distributions at different reversal sizes to those predicted under market randomness via the runs test approach. Keywords: point and figure, computational finance, runs tests. 1 Introduction Users of financial markets data have produ

Keywords