Point and Figure (P&F) charts plot price vertically, forming columns of Xs and Os. While these charts offer objective analysis, patterns often come with wide stop losses due to long columns. To manage this, traders either use smaller box sizes or lower timeframes, or focus on a more refined approach—trading the “Follow Through,” which is the highlight of this newsletter.

What is a Follow Through?

In simple terms, a Follow Through on P&F charts is simply a pattern followed by a basic breakout pattern of similar nature. That is, a Bullish pattern “followed” by a basic bullish breakout - Double Top Buy pattern (DTB). Similarly, a Bearish pattern is followed by a basic bearish breakout - Double Bottom Sell pattern (DBS).

Why is Follow Through important?

A Follow Through is important for 3 reasons on P&F chart:

1. Affordable Stop Loss: For a DTB, the lowest O of the pattern is a failure level and for a DBS, the highest X of the pattern is a failure level. Like mentioned earlier, some patterns like Turtle, Broadening, Double Broadening, Anchor patterns, or Triangle patterns’ stop loss can be unaffordable. A Follow Through’s failure level can be more affordable compared to the pattern stoploss.

2. Strength of the pattern: When a bullish pattern forms, it shows the demand in the instrument. When this bullish pattern gets a follow through, it further confirms the strength of the pattern and the demand in the instrument. Similarly, when a bearish pattern forms, it shows the supply in the instrument and the bearish follow through confirms the weakness in the instrument.

3. Acts as a filter: Some patterns on the P&F chart fail immediately while others don’t. Follow Through patterns act as a filter for the patterns that worked and that failed immediately.

Each of the patterns discussed above reflects specific price behavior. For instance, a Broadening pattern indicates indecision, while a Turtle pattern signals a consolidation breakout. These patterns represent demand and supply in a structured, objective way.

In the course How To Trade Point & Figure, I have covered these patterns in detail along with several others. If you are new to Point & Figure charts and wish to understand price action through an objective lens, through a lens of demand and supply, consider exploring the TNT One membership. It provides access to this course, along with multiple other recorded courses, webinars, and weekly sessions. If you are already a member, this is a good opportunity to revisit these concepts and make full use of your membership.

Observe the chart below of BEL on 0.5% (Daily). In the chart below, Turtle bullish breakouts are marked as black horizontal line and their Follow Through is marked as green horizontal lines. Observe the size of the columns of turtle pattern. For a turtle pattern, the lowest O of the pattern is the pattern failure. Now observe the failure level of the follow through.

In the chart below of AAVAS, Triple Bottom Sell is marked as a black horizontal line and its follow through is marked as a red horizontal line. Observe the Triple Bottom Sell failure level, which is the highest X of the pattern. Now observe the Follow Through’s failure level. This level is comparatively affordable than the Triple Bottom Sell.

Trading Follow Through of a pattern is also a function of the pattern itself. In the course on P&F charts, I have explained many patterns, but I have also discussed how often these patterns form. Patterns such as Broadening, are a rare formation and trading their follow through can be even rare. Therefore, to trade Follow Throughs, we must first understand these patterns and their logic.