Floor traders pivots like moving averages, trend lines and price support and resistance lines are nothing more than caution signs along the road of trading. They alert you to the fact that this is an area where trend may start or change. At these points you need to assess the overall market conditions and how volume reacts to the FTP, MA, S/R, Fibs or whatever. If you have convergence of a pivot, MA and S/R, well the chances of something happening are higher than if just one of them were present. Convergence of lines and what volume tells you during the period price meets these levels is key.
Are pivots useful ? a statistical response
- Thread starter fortuna
- Start date
Gotcha. Pivots are just more pieces to the puzzle.
thanks,
jd
Of course...knowing that a couple hundred to a few thousand traders will be watching a specific price is always a waste of time...please see today (friday's) NQ 5 min chart that I've attached to see just how utterly useless it was for me to know where the pivot points were today...
jd, as has been discussed by numerous traders on this site, the market always moves from one mode to another because certain things 'block' its path. when a pivot fails (price whipsaws around pivot causing a stop and reversal twice in a row), you will often notice the rest of the day is chop. this in itself can be used to your advantage. you may choose to stop trading until the market moves back into a trending mode, OR you can change your trading system as the market dictates.
i have posted a chart of the SPY for the day you mentioned. remember, at the lowest level, floor traders are seeking liquidity. what does that mean? well, think about it. they 'seek' buyers and sellers. the pivot levels mark the boundary between buyers and sellers. so, you will always find that floor traders will sweep price between pivot levels in the morning, first one way, then the other, to see where liquidity is -- that you probably already know. what you are not seeing, as i suspect, is that after the first two 'checks' of liquidity in the morning, trends do not reverse themselves that quickly (volume drops off, buyers and sellers have already participated at the previous pivots, many of them still in their trades). if you take a look at the chart you will probably figure it out. hint: it takes more than a simple bounce off of a pivot level to truly reverse the trend.
funky
i have posted a chart of the SPY for the day you mentioned. remember, at the lowest level, floor traders are seeking liquidity. what does that mean? well, think about it. they 'seek' buyers and sellers. the pivot levels mark the boundary between buyers and sellers. so, you will always find that floor traders will sweep price between pivot levels in the morning, first one way, then the other, to see where liquidity is -- that you probably already know. what you are not seeing, as i suspect, is that after the first two 'checks' of liquidity in the morning, trends do not reverse themselves that quickly (volume drops off, buyers and sellers have already participated at the previous pivots, many of them still in their trades). if you take a look at the chart you will probably figure it out. hint: it takes more than a simple bounce off of a pivot level to truly reverse the trend.
funky
Some people don't want to say too much especially scalpers for this is a zero and even negative sum game don't forget. Worst at scalp level - and pivot are mostly used for scalp style - liquidity has a big impact on slippage. The more people are trading the same numbers the more worst liquidity will become and so slippage. Slippage can cost much more than your broker's fees at very low scale it can even kill you as a scalper - I was killed once because of that so I know that well 
.
.BTW...for those of you still pulling out your hair trying to figure out why Funkys spreadsheet and the calculator didn't match, I figured it out. Seems the calculator is screwed up. What it's showing as R3 and S3 is actually R4 and S4. So, the calculator doesn't show R3 and S3. Here's the proof if you don't believe me...