By no means am I an expert on P&F, but what I understand I will share. The main point of P&F charts is to take the "noise" (less significant regular fluctuations in a stock's movement) out of the way so you can get a clearer picture of the current condition of the stock. When you're looking for buy or sell signals, you don't want your settings to be too sensitive or the P&F chart won't filter out the noise and you'll get a lot of buy and sell signals. On the other hand, you don't want it to be too INsensitive or you could miss significant moves to which you should be paying attention. You can do this in two ways, either by adjusting the amount of boxes needed for a reversal or by adjusting the value of each box. Sometimes a mixture of both might be better. Below I'm going to compare two different line charts of Goldcorp Inc displaying the buy and sell signals given by a P&F chart with box values of .5 with a 3 box reversal, then of .7 with a 3 box reversal.
You can see obviously how a .5 box value generated many B&S signals and would have had you buying high and selling low if you went solely on P&F while the .7 box value identified the significant resistance break and trend reversal. The same thing can be done with adjusting the # of boxes needed for a reversal signal. First a .5 with a 4 box reversal and below that a .5 with a 6 box reversal. 
You can see how adjusting the reversal achieved the same result. The downtrend was identified in June of 06 and the buy signal was in the same place as for the .7 with the 3 box reversal. I would always recommend looking at the line chart also to see the daily activity along with the various indicators that we've been taught, but this at least is one way to use P&F charts.
You can see obviously how a .5 box value generated many B&S signals and would have had you buying high and selling low if you went solely on P&F while the .7 box value identified the significant resistance break and trend reversal. The same thing can be done with adjusting the # of boxes needed for a reversal signal. First a .5 with a 4 box reversal and below that a .5 with a 6 box reversal. You can see how adjusting the reversal achieved the same result. The downtrend was identified in June of 06 and the buy signal was in the same place as for the .7 with the 3 box reversal. I would always recommend looking at the line chart also to see the daily activity along with the various indicators that we've been taught, but this at least is one way to use P&F charts. I'm using them in a sort of a broad way. I'm looking to identify LT trends so that when I see a signal, it's more significant to me and I can reasonably rely on it for possibly months on end. With the buy signals here, I could watch for "touchdowns" to trendlines as entry points, but I could do that just by looking at the line charts. I haven't really used these a lot and haven't found a lot of use for them yet. If anyone else relies on them heavily or has insights that I've missed, please help me (and mario) learn by sharing them with us...
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