What is the count?
The term count refers to a form of technical analysis that uses point-and-figure (P&F) charts to assess the vertical movement of stock prices. Designed to be used for long-term investment analysis, point-and-figure charts are considered one of the easiest ways for traders to determine entry and exit points. Traders using count analysis plot price increases and decreases that are used to determine target prices.
- Count is a form of technical analysis that uses point and figure charts to assess the vertical movement of stock prices.
- Count analysis uses X to represent price increases and Os for price decreases to determine target prices.
- Count calculations are based on historical lateral price movements, which are used to determine the probability of hitting a target price.
- There are various counting methods such as the break count method, the reverse counting method, and the horizontal counting method.
Understanding the count
Technical analysis is a type of trading discipline that uses charts and graphs to assess past trends in stocks, such as price and trading volume, to determine future performance. Traders employ technical analysis techniques to find entry and exit points that will optimize profits. Some traders use point and figure charts without regard to the passage of time. This technique is known as count analysis.
The count analysis plots X to represent price increases and Os for price decreases on your graph. Analysts base count calculations on historical sideways price movements and use them to determine the probability that a target price can be reached. The X and O count analyzes are used with a traditional scale and a predetermined investment amount. Traders use this to determine whether certain positions are profitable. Investors can review the sequence of price fluctuations to estimate how prices will move in the future. There are several counting methods such as the breakout count method used to find a bullish price target to be used with an active P&F buy signal.
As an investor, you can review the sequence of price fluctuations to estimate how prices are likely to move in the future.
Count Analysis Types
As noted above, there are different methods for counting analysis, such as breakout, reversal, and horizontal counts.
Break count analysis
The breakout count method is used to find a bullish price target to be used with an active P&F buy signal. There are four steps to this method.
First, the most active sell signal, known as the Double Bottom Breakdown, should be found on the P&F chart, working from right to left. The second step is to work to the right of this signal to find the next buy signal or double top breakout. The column that produces this signal is key because it becomes the measurement column. Then the height of the measure column must be calculated and multiplied by the investment amount of the box. Finally, the total of this calculation must be added to the minimum of the column to the left of the measure column.
Reversion count analysis
The reversal count method can be used to find bullish and bearish price targets. There are three steps that are used to find bullish prices. The reversal count should be used with an active P&F buy signal. First, working from left to right, the most recent P&F sell signal should be found. Column X next to the sell signal becomes the measure column. Next, the height of the column must be calculated and multiplied by the investment amount of the box. Then the total should be added to the minimum of the column to the left of the measure column.
Horizontal count analysis
For the horizontal counting method, a congestion or reversal pattern must be formed on a P&F chart. The congestion pattern must be a minimum of five columns wide and must have one column that breaks congestion. The columns of this pattern must be counted. This is the width. Once the breakout column occurs on the P&F chart, analysts can multiply the width by the size of the box and the amount of investment to estimate the spread of the price. The spread is added to the low of the pattern for a price target.