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Q: How do you determine where to put the red and blue trendlines on your P&F charts?
A: If you select "Trend Lines" in the Overlays area of our P&F Charting Workbench, we automatically add red and blue trendlines to your chart like this:
(Click here for a live version of this chart.)
We add these trendlines by following a core tenet of Point and Figure charting - trendlines on P&F charts are always drawn at 45 degree angles.
(I don't have a reference to the original source of that guideline. It's been around as long as P&F charting itself.)
Giving the 45-degree rule, it's just a matter of determining where to start a new automatic trendline. As you can see above, we select "significant" poles to start each new line. For example, look at the down pole that occurred in March of 2009 - that was the basis of the long blue uptrend that IBM has had until today.
Once they are started, trendlines extend until they are broken by the P&F price action.
- Chip
