Pivot Levels
- Thread starter dbphoenix
- Start date
Quote from gamalruach:
Re: say what?
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Quote from gamalruach:
What are "pivot levels?"
Gamal
A pivot level is a price point , in which your trading vehicle, has traded at in the past, and is anticipated to trade at again in the future.
Does this help?
Hello everyone:
One of the reasons that pivots work is that retail traders believe that they are the "secret" method that local floor traders use (actually, floor traders mostly trade off the order flow, taking advantage of the signals that come by way of crowd noise, position in the pit, etc). To make money off the floor, retail traders need to find an edge. One way to do this is to find some basis or set of assumptions that will guide your decisions. If you look at the Emini charts today, you can see the late test of R1 pivot. The way I interpret this play is that smart money marked the market up to see if there was interest in a late day rally. They hit the stops (thousands of them) that were placed in the obvious place (right above R1). When those stops were hit, a lot of traders had to cover by selling, and because most of the buyers went home after lunch, the market dropped like a rock. By themselves pivots mean nothing (in my opinion). To make use of them, you really have to have additional data. I use volume, Tick, Ticki, Prem, Trin and NYSE advancing and declining issues. I use these indicators like on/off switches. If I see more on than off, I know I am on the right track. Hope this is of some help. Best Regards, Steve46
One of the reasons that pivots work is that retail traders believe that they are the "secret" method that local floor traders use (actually, floor traders mostly trade off the order flow, taking advantage of the signals that come by way of crowd noise, position in the pit, etc). To make money off the floor, retail traders need to find an edge. One way to do this is to find some basis or set of assumptions that will guide your decisions. If you look at the Emini charts today, you can see the late test of R1 pivot. The way I interpret this play is that smart money marked the market up to see if there was interest in a late day rally. They hit the stops (thousands of them) that were placed in the obvious place (right above R1). When those stops were hit, a lot of traders had to cover by selling, and because most of the buyers went home after lunch, the market dropped like a rock. By themselves pivots mean nothing (in my opinion). To make use of them, you really have to have additional data. I use volume, Tick, Ticki, Prem, Trin and NYSE advancing and declining issues. I use these indicators like on/off switches. If I see more on than off, I know I am on the right track. Hope this is of some help. Best Regards, Steve46
Don't kid yourself about floor traders NOT using pivots.
Pivots came from the floor trading community, and some floor traders have developed variations of the pivot system to become even more succesful, such as legendary New York Commodity Trader, Mark B. Fisher.
From The Logical Trader by Mark B. Fisher:
The ACD system - plotting price points in relation to the opening range - requires no expensive software. The method provides reference points for trading - A and C points are for entry and B and D are stops. Using the system the trader can calculate when to go long or short. Coupled with additional indicator and measurements, layered on top of the ACD system, the trader will be able to develop a trading plan.
To use the ACD system -which is based on simple math - the trader must have certain abilities including collect and analyze information, make and implement decisions, be good with numbers, be disciplined to follow the system. Fisher describes pivot points, the daily pivot price (high+low+close)/3), daily pivot range, 3-day rolling pivot, etc. The last 30 days data are viewed to obtain the big picture of the vehicle being traded. He calls this his Macro ACD. He provides 25 chart examples to illustrate how to score each day.
Fisher adds more meat to the ACD system by introducing the use of pivot moving average (using daily pivot price as opposes to the days close) to determine the current trend (up, down or flat). He uses three pivot point moving averages (14 day, 30 day and 50 day) and focuses on looking at the slope of the moving average line to determine the existing trend or rate of change in the trend. Then Fisher covers exit strategies. He explains the rolling pivot range (RPR) which typically spans 3 to 6 trading days. This is the reference point for entry of the trade. The RPR lets you keep your winning position longer and gets you out of your losing positions in a more profitable manner. Fisher also calculates the price momentum of todays close compared to 8 days ago to determine the trend. He then discusses his use of the "reversal" trade set-up to exploit the market failures. Other subjects covered include the two-way swing, trend reversal trade and sushi roll (change in the direction of the market), and outside reversal week.
Pivots came from the floor trading community, and some floor traders have developed variations of the pivot system to become even more succesful, such as legendary New York Commodity Trader, Mark B. Fisher.
From The Logical Trader by Mark B. Fisher:
The ACD system - plotting price points in relation to the opening range - requires no expensive software. The method provides reference points for trading - A and C points are for entry and B and D are stops. Using the system the trader can calculate when to go long or short. Coupled with additional indicator and measurements, layered on top of the ACD system, the trader will be able to develop a trading plan.
To use the ACD system -which is based on simple math - the trader must have certain abilities including collect and analyze information, make and implement decisions, be good with numbers, be disciplined to follow the system. Fisher describes pivot points, the daily pivot price (high+low+close)/3), daily pivot range, 3-day rolling pivot, etc. The last 30 days data are viewed to obtain the big picture of the vehicle being traded. He calls this his Macro ACD. He provides 25 chart examples to illustrate how to score each day.
Fisher adds more meat to the ACD system by introducing the use of pivot moving average (using daily pivot price as opposes to the days close) to determine the current trend (up, down or flat). He uses three pivot point moving averages (14 day, 30 day and 50 day) and focuses on looking at the slope of the moving average line to determine the existing trend or rate of change in the trend. Then Fisher covers exit strategies. He explains the rolling pivot range (RPR) which typically spans 3 to 6 trading days. This is the reference point for entry of the trade. The RPR lets you keep your winning position longer and gets you out of your losing positions in a more profitable manner. Fisher also calculates the price momentum of todays close compared to 8 days ago to determine the trend. He then discusses his use of the "reversal" trade set-up to exploit the market failures. Other subjects covered include the two-way swing, trend reversal trade and sushi roll (change in the direction of the market), and outside reversal week.
Can't speak for the eminis, but in stocks, definitely agree. Unless a trader has quite a bit of experience, I'd recommend not bothering with pivot points. They will most likely confuse those with less experience. Sometimes they will "shock and awe" and be right on the money. Most other times they will add to confusion, leaving the less experienced wondering what went wrong.
