Three Point Reversal Method of Point & Figure Stock Market Trading with A.W. Cohen

The Three Point Reversal Method of Point & Figure stock market trading, developed by A.W. Cohen, is a unique and powerful technique for identifying market trends and making informed trading decisions. This article will delve into the core principles of the Three Point Reversal Method, its applications, and how you can utilize this approach to enhance your trading strategy.

Introduction to Point & Figure Charting

What is Point & Figure Charting?

Point & Figure (P&F) charting is a technical analysis method that focuses on price movements, ignoring time and volume. It is a clean and straightforward charting technique that helps traders identify trends and reversals.

History of Point & Figure Charting

• Origins: Developed in the early 20th century.
• Evolution: Refined over time, with A.W. Cohen contributing significantly to its development.

Understanding the Three Point Reversal Method

What is the Three Point Reversal Method?

The Three Point Reversal Method is a technique within Point & Figure charting that identifies trend reversals by marking a change in direction after three boxes (price units) move against the prevailing trend.

Why Use the Three Point Reversal Method?

• Simplicity: Easy to understand and apply.
• Clarity: Provides clear signals for trend reversals.
• Effectiveness: Proven track record in identifying significant market moves.

Components of the Three Point Reversal Method

Box Size

• Definition: The price movement required to add a new X or O to the chart.
• Selection: Typically set based on the volatility of the stock or asset.

Columns of Xs and Os

• Xs: Represent upward price movements.
• Os: Represent downward price movements.

Three Point Reversal

• Trigger: Occurs when the price reverses direction by at least three boxes.

Setting Up a Point & Figure Chart

Choosing a Charting Platform

• Software Options: Use platforms that support Point & Figure charting.
• Customization: Ensure the platform allows for setting box sizes and reversal criteria.

Configuring the Chart

1. Select Box Size: Based on the asset’s volatility.
2. Set Reversal Amount: Configure the chart to trigger reversals after three boxes.
3. Plot Data: Input historical price data to generate the chart.

Interpreting Point & Figure Charts

Identifying Trends

• Uptrends: Series of rising columns of Xs.
• Downtrends: Series of falling columns of Os.

Spotting Reversals

• Three Point Reversal: Indicates a change in trend direction after three boxes.
• Signal Confirmation: Look for additional indicators to confirm the reversal signal.

Support and Resistance Levels

• Horizontal Lines: Drawn at significant price levels where the trend has reversed.
• Trendlines: Connecting highs or lows to identify longer-term trends.

Trading Strategies with the Three Point Reversal Method

Entering Trades

Buy Signals

• Bullish Reversal: Enter a long position when a three-point reversal occurs in an upward direction.
• Support Confirmation: Ensure the reversal occurs near a support level.

Sell Signals

• Bearish Reversal: Enter a short position when a three-point reversal occurs in a downward direction.
• Resistance Confirmation: Ensure the reversal occurs near a resistance level.

Exiting Trades

Profit Targets

• Set Targets: Based on historical support and resistance levels.
• Adjust Targets: According to market conditions and price movements.

Stop-Loss Orders

• Initial Placement: Below support for long positions and above resistance for short positions.
• Trailing Stops: Adjust as the trade moves in your favor to lock in profits.

Advantages of the Three Point Reversal Method

Clarity

• Clear Signals: Provides unambiguous signals for trend reversals.
• Simple Interpretation: Easy to read and understand, even for beginners.

Focus on Price

• Price-Based Analysis: Ignores time and volume, focusing solely on price movements.
• Eliminates Noise: Reduces market noise for clearer trend identification.

Proven Track Record

• Historical Success: Widely used with a proven history of effectiveness.
• Adaptability: Applicable to various markets, including stocks, forex, and commodities.

Common Challenges and Solutions

False Signals

• Challenge: Occurrence of false reversals.
• Solution: Use additional indicators and confirm signals before trading.

Market Volatility

• Challenge: High volatility can lead to frequent reversals.
• Solution: Adjust box size and reversal criteria to suit market conditions.

Chart Configuration

• Challenge: Incorrect setup can lead to misleading charts.
• Solution: Ensure proper configuration and regularly update settings based on market behavior.

Real-World Applications

Case Study: Successful Implementation

Background

• Setup: Trader uses the Three Point Reversal Method on the S&P 500 index.
• Execution: Enters trades based on identified reversals.

Outcome

• Profit: Achieves consistent profits by following clear reversal signals.
• Analysis: Highlights the effectiveness of the method in volatile markets.

Tips for Effective Trading

Patience and Discipline

• Wait for Confirmation: Ensure patterns are fully formed and confirmed.
• Stick to Your Plan: Follow your trading strategy and avoid impulsive decisions.

Continuous Learning

• Stay Updated: Keep learning about new patterns and market trends.
• Practice: Regularly practice pattern detection and trading to improve skills.

Conclusion

The Three Point Reversal Method of Point & Figure Stock Market Trading with A.W. Cohen offers a clear, effective, and proven approach to identifying market trends and reversals. By understanding and implementing this method, traders can make informed decisions, manage risk, and achieve consistent trading success. Embrace the simplicity and precision of the Three Point Reversal Method to elevate your trading strategy.

Frequently Asked Questions:

 

1. Business Model Innovation:
   Embrace our legitimate business model! We organize group buys, allowing participants to share costs for popular courses, making them accessible to those with limited financial resources. Our approach ensures affordability and accessibility, despite author concerns.

2. The Legal Environment:
The legality of our activity is uncertain. While we lack specific permission from course authors, there’s a technicality: authors didn’t impose resale limits upon course purchase. This presents both an opportunity for us and a benefit for individuals seeking low-cost access.

3. Quality Control:
Unveiling the Truth
Quality is paramount. Purchasing courses directly from sales pages ensures consistency with traditionally obtained materials. However, we’re not official course providers and don’t offer premium services:

• No scheduled coaching calls or sessions with the author.
• No access to the author’s private Facebook group or web portal.
• No entry to the author’s private membership forum.
• Direct email support from the author or their team is unavailable. Operating independently, we aim to bridge the pricing gap without additional services provided by official channels. Your understanding of our unique approach is valued.