In a trade setup, having an exit criterion based on targets is quite common. The logic behind this is straightforward: when we enter a trade, we are essentially betting in a particular direction without knowing how far the price will move. Therefore, it is easier to exit based on a predefined target rather than attempting to predict the entire move. If the price surpasses the target, the trader simply allows the trade to conclude at the set level and shifts focus to identifying the next opportunity that aligns with the strategy. This method of exiting promotes discipline and consistency in trading. In today’s newsletter let us understand how to set targets that are objective based on Point and Figure charts

Understanding Vertical counts

Point and Figure charts are objective and long-term charts. Why? Because they plot price based on box sizes and because they follow a vertical plotting system, meaning each box is plotted above or below the previous box (depending on the type of column). Because this charting method objective, the targets that are plotted are also objective.

To plot targets on Point and Figure charts, a tool known as Vertical Counts is used. This tool projects the length of a column from its high (in the case of a bullish count) or low (in the case of a bearish count) to estimate a potential price target.

As per the traditional theory, Vertical counts are plotted from mini-tops (in case of a downtrend) and from mini bottoms (in case of an uptrend). Vertical counts are plotted from the breakout column that completes the mini-top or mini-bottom.

A simple setup using Vertical counts

A simple bullish setup using this tool can be as follows:

1. Price above the 20-column EMA line

2. Entry should be the mini-bottom.

3. Exit based on the vertical count’s target.

Observe the chart below of GVT&D on 0.5% (Daily) and of 360ONE on 1% (Daily). The mini-bottoms as a green box below the columns. The black line is the 20 column EMA line. The Vertical counts (green lines above the column) are plotted from the breakout column that completed the mini-bottom.

Plotting vertical counts requires one to understand which pattern to plot them from. Also, we need to understand when the vertical count is negated, when it is active, and what an aggressive vertical count is. In my recent YouTube video, I have explained these concepts and shown how to plot these counts on the charts. If you haven’t watched the video yet, do watch it below 👇👇👇