DEFINITION of Box Size
Box size is the minimum price change that must occur before the next mark is added to a point-and-figure chart. A point-and-figure chart's box size determines the value of price movements that will be recorded by each mark on the chart. Technical analysts use charts to view past and current price information for particular trading instruments, such as stocks or futures contracts. A traditional bar chart plots price changes at specific time intervals, such as a daily chart or a five-minute chart. Point-and-figure charting, on the other hand, adds a new mark only after price has moved a specified amount. This amount is known as the box size.
BREAKING DOWN Box Size
Point-and-figure charts plot prices uses a series of Xs and Os, known as boxes. An X indicates that prices are rising, and an O shows that prices are dropping. Investors and traders must specify the box size in order to establish how much price must change before a new box is printed. If a 50-cent box size is specified, for example, then a new X or O (depending on the direction of price) will be printed each time price moves that amount. When prices are rising, Xs will be stacked on top of each other every time that price moves up 50 cents, forming a column. Once price drops 50 cents, a new column of Os will begin to the right of the previous X column. As long as prices drop, additional Os will be stacked under the first O to show each 50-cent fall in price. Charts with larger box sizes provide a less detailed view of the markets, while charts with smaller box sizes show a more detailed view.