Box Size
What Is a Box Size?
A case size is the base price change that must happen before the next mark is added to a point-and-figure (P&F) chart.
Understanding Box Size
Box sizes are an essential part of P&F charts since they decide the value of price movements that will be addressed by each mark on the chart. A container size of $1.00, for instance, would mean that each mark on the P&F chart addresses a $1.00 change in the price of the security.
Technical analysts utilize different charts to direct their investment choices. These charts capture past and present price data to help with deciding when to buy or sell a specific security, for example, a stock or a futures contract.
Traditional chart types incorporate candlestick, bar, and line charts, which plot price changes at specific time spans, for example, once each trading day. P&F charts, then again, add another data point just once the price of the security has moved by a specific amount. The amount by which the price must change before another data point is added is called the container size.
To understand further, consider the accompanying illustration of a P&F chart:
The circular shapes shown address a decline in the price of the security, while the X shapes address an increase in price. The space on the chart where every one of these shapes happen is called the "crate." In this model, the container price is $5.00. Thusly, a column with three X shapes addresses an increase of $15.00, a column with 12 circles addresses a decline of $60.00, and so on.
Box Size Example
At the point when prices are rising, the Xs of a P&F chart are stacked on top of each other each time the price increases by the container size, creating a column. Likewise, when the price drops by an amount equivalent to the container size, another column of circles will be made to the right of the previous X column. However long prices keep on dropping, extra circles will be stacked under the primary circle to mean each extra box-sized decline in price (in this case, in augmentations of $5 each).
P&F charts with bigger box sizes give a less itemized perspective on the security being referred to, while charts with more modest box sizes give a more definite view.
Assume, for instance, that in the chart over the container size was $50 rather than $5. In that scenario, a significant number of the columns of Xs and Os displayed on the chart wouldn't be noticeable by any stretch of the imagination. The subsequent state of the chart would be more smooth, showing just the high level price movement with less of its nuanced pinnacles and valleys.
The inverse is likewise true. In the event that the crate size was $1 rather than $5, we would see a lot higher resolution of price varieties.
Every trader will have their own inclinations with respect to the level of detail they wish to find in their charts. By tweaking the crate size, traders can change P&F charts to uncover just the level of detail they see as most helpful in their analysis.
Highlights
- They are utilized by technical analysts to decide the amount of resolution they wish to see.
- Box sizes are a critical part of P&F charts.
- Changing the container size of a P&F chart will influence how much the price of the security being noticed requirements to change before another data point will be added to the chart.
