Ever since I discovered them, noiseless charts have been an indispensable part of my trading journey. Analysis using noiseless charting methods, especially Point and Figure (PnF) charts, has made my trading process more objective and efficient. PnF charts have directly or indirectly been a part of my trading decisions. An important aspect of the noiseless charts is choosing the right box size.

Today’s newsletter tries to give the reader a clear understanding of the box sizes that I use on PnF charts.

A note on Timeframe on PnF charts

If you are a frequent reader of my newsletters, you must have observed in the charts used for example that the time frame used is Daily timeframe. If noiseless charts are time independent charts, then what does timeframe have to with box size? This is a common confusion among new adapters of noiseless charts.

The meaning of timeframe on Noiseless charts is different from the meaning of timeframes on candlestick charts.

On candlestick charts, the timeframe refers to the time interval for plotting a single candle. The candle captures all the price action that has taken place in the time period. When the time frame is set at 15-min, each candle on the chart represents 15 mins of price action. When set to daily timeframe, each candle represents every day’s price action.

On noiseless charts, however, price gets plotted only if the price moves enough to fulfil the condition of continuation or reversal. The timeframe set on the noiseless charts is the frequency to check if any one of the conditions for plotting the price has been met. At the end of the timeframe, the conditions are checked. For example, if the timeframe is set for daily, the conditions will be checked at the end of the day and price will be plotted accordingly. If the timeframe is set for 1-min, the conditions will be checked at the end of each minute.

No matter how much price action takes place within the timeframe, the conditions will be checked at the end of the timeframe and boxes will be plotted only if the price meets the condition at the end of the timeframe.

Observe the charts below of CHOCHINSHIP. Both the charts are set at 1% box size. This means that boxes are plotted when the price moves in the multiples of 1%. The difference between both the charts is the Timeframe. The first chart shows the chart on Daily TF and the second chart shows the chart on 1-min TF. Observe the price range on the right side of the chart. The daily TF chart shows that each box in itself is a significant information, and it holds more weight in itself than a 1-min TF chart. 1-min chart shows multiple boxes plotted.

Box sizes on PnF charts

Unlike other noiseless charts, price on PnF charts are plotted in columns. For this reason, these charts can capture a huge amount of price action within a few columns. Each box size conveys information of differing importance.

It can be observed that the box size for stocks and index are different. The reason for this is that stocks are more volatile than index. The box sizes of index are smaller than those of stocks. If the box size of stocks would be used for index, very little boxes would get plotted and the analysis would be misleading. Index is a basket of stocks. The price action of each stock in the basket are averaged out, therefore making them less volatile. The index box sizes can not only be used for index but for any basket of stocks or portfolio.

More volatile the instrument, bigger the box size used.

**For stocks, 0.15% (1-min TF) can be used for taking trades on intraday basis. For Index, 0.05% (1-min TF) can be used for taking trades on intraday basis.

The use of box sizes

The use of box sizes is predominantly done in Multi Timeframe Analysis. The whole logic of Multi Timeframe Analysis is to analyse the instrument on bigger box size and participating in them on a lower box size. This allows for participation on smaller box size in the direction of bigger box size’s trend.

In my course How To Trade Point and Figure, I have explained the patterns that are relevant on the different box sizes. I have also explained what a trader should observe on the various box sizes and why some patterns are more relevant on one box size and not on other. This is put forth in a very structured manner to make learning easy. Do check it out.