Does Point & Figure Charting (X's and O's) actually work?

MARGINAL

Real but small -- not worth what it costs to run.

The claim

The double-top buy / double-bottom sell signals time the market better than holding — Charting tradition / Dorsey Wright

What we did

Tested against Buy & hold SPY / honest reconstruction.

The result

Result: Long 1960-2026: +6.8%/yr vs buy-hold +7.5%, maxDD -38% vs -57% (3% box, Sharpe 0.59 vs 0.53)

Long 1960-2026: +6.8%/yr vs buy-hold +7.5%, maxDD -38% vs -57% (3% box, Sharpe 0.59 vs 0.53)

Verdict

Point & Figure is trend-following in costume. Going long its double-top buy signals and flat on the double-bottom sells, it gives up ~1%/yr of return for a meaningfully smaller drawdown (-38% vs -57%) and a hair better Sharpe -- real risk reduction. But a plain 10-month moving average does the SAME job better (it halves the drawdown; P&F only trims a third). The X's and O's add ceremony, not edge -- and bigger boxes (3%) beat small ones by whipsawing less.

What the test did and did not do

net of real costs
tested out of sample
point-in-time data
checked for look-ahead

Almost nobody publishing a backtest says which of these they did. We list the ones we failed as well as the ones we passed.

Tested 2026-06-23. The same treatment, applied to every other system, is on the test bench.

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Written with AI assistance from our own test database. The numbers are computed, not composed.
General market commentary for education, not personalised investment advice. Backtested results are hypothetical. Trading carries a real risk of loss.