Trading the Pivots

[JimmyJam]

Quote from 4re:

Steve,
Very good info. I like the way you stated it and I can't disagree with any of it.

Thanks

Yeah,

I actually based my study of the Pivots (using the 1 Day vs. 3 and 5 day averages, along with taking trades off of Support and Resistance Levels in the direction of the dominant trend) based on my interpretation of Steve's commnets on using Linear Regression.

If you visualize the Median Pivot as being the Middle of the Line, Support being the Left End Point in an Uptrend (vice/versa for a Downtrend) and Resistance being the Right End Point in an Uptrend (vice/versa for Downtrend) you'll see what I mean.

Best,

JJ

 

[JimmyJam]

Quote from JimmyJam:

Re-enter Long @ 1301.5

Will hold this trade MOC.

So far one loss, one breakeven and some really good advice.

All-in-all, I'd say it's a good day and if this works to 1305.5 it'll be even better.

Best,

JJ

P.S. In light of today's loss, and the new information supplied by Steve and Trader273 comments, I'll be making an amendment to the setups so that they are more conserative in nature.

 

[DonKee]

Quote from JimmyJam:

Will hold this trade MOC.

So far one loss, one breakeven and some really good advice.

All-in-all, I'd say it's a good day and if this works to 1305.5 it'll be even better.

Best,

JJ

P.S. In light of today's loss, and the new information supplied by Steve and Trader273 comments, I'll be making an amendment to the setups so that they are more conserative in nature.

I'm not sure how much you need to tweak. I didn't want to post during the day today, so as not to throw more information into the mix.

As you know from my previous posts, I tend to just trade the S1,S2 and R1,R2 areas using a 4 point stop.

Think about it this way. If you would have entered your first trade at 2.25, you would have had your stop at 98.25. From looking at your rules the system seems sound. Yea, you're going to have some losers, but you can't tweak everytime you have a loser, unless you really thinks it's something substantial.

In looking at the market in context today, the nas was terrible, we just came off of 5 straight up days, volume slowed during the past two up days, so the odds were, we were/are running out of steam and need a little digestion. That's all. I wouldn't be surprised if we get a lot of chop chop chop for the next few days.

 

[4re]

Hey JJ,
I came across this article and thought you might like it. It is a little long winded but I usually like his articles.

http://www.tradingmarkets.com/.site...-only-trade-one-strategy-this-would-be-it.cfm

Best to you,
Gary

 

[LondonUSTrader]

Quote from DonKee:

From looking at your rules the system seems sound. Yea, you're going to have some losers, but you can't tweak everytime you have a loser, unless you really thinks it's something substantial.

One of the great dangers is actually tweaking on the basis of every little loss or valid comment. Eventually you have so many rules that eliminate many trades you aren't really trading enough or accepting that risk and uncertainty are a critical part of this game.

I also went long today and got stopped out. At the time I knew it was against the trend and therefore highly possible to lose. However, that is just the nature of trading. I do not even have one thought of changing anything nor would I as this result is in line with my tested results.

Here's my point. If you back/forward test a system and it has a positive expectancy based on a certain set of rules, are you going to change those rules based on one trade or comment? No. You are going to trade every signal precisely. Not to say there isn't a certain developmental process whereby you are adjusting your rules for a while in a forward testing sense to refine your rules. However, when you are trading real money that process should be over and you shouldn't be changing rules unless there becomes a significant difference between your tested and actual results to justify that (which would be rare).

No comment or single trade should affect your rules in any way. There is a danger in becoming too conservative. You want to trade as much as possible, but trade high quality setups as well IMHO.

Much of what I am saying is about self trust and faith in your system. No method of trading is perfect so we shouldn't aim at perfection.

Cheers.

 

[steve46]

Excuse me

I have no idea if you are tweaking your system rules based on my comment, but if you are tempted to, I would say hold off and THINK about it for a while.....

I don't know if it helps you to say this, but I don't make changes in my system rules during the work week. I wait until the weekend and I TEST first, then I look to see if I can adapt any changes to my basic rule set.

Hope that helps,

Steve

 

[JimmyJam]

Quote from 4re:

Hey JJ,
I came across this article and thought you might like it ...

Hey Gary,

Thanks for the article.

That's a ton of information on the major indices, and gives me some more good clues on why the NQ makes for a little bit better trading than the ES.

I'll have to read it in detail when I've gotten som sleep .

Later,

JJ

 

[kiwi_trader]

Quote from steve46:

I don't know if it helps you to say this, but I don't make changes in my system rules during the work week. I wait until the weekend and I TEST first, then I look to see if I can adapt any changes to my basic rule set.

Yes, yes, yes !~!!!!

Never, ever, ever change on the fly. Test off line. Forward test. Then live.

The human brain is designed for eating nuts and chasing small mammals and birds ... its design will fool you into chasing illusions in the market unless you lock it down with solid logic and discipline.


Not saying you guys are doing it ... just saying that it always cost me money when I did in the past. And its funny how things that work under "see the whole chart" backtests don't work under walk forward

 

[JimmyJam]

Quote from JimmyJam:

P.S. In light of today's loss, and the new information supplied by Steve and Trader273 comments, I'll be making an amendment to the setups so that they are more conservative in nature.

In striving to create a model (i.e., conceptual framework, which may or maynot accurately reflect the reality) of the financial markets I am making these addendums to the basic working instruction on Trading the Pivots.

Conservative Trades
1. If you choose to be a more conservative trader, be sure to only take the Continuation Trades which setup, in the direction Pivot Trend, once Support, Pivot or Resistance have been hit.

These trades are essentially just pullbacks against the dominant trend, and will generally be worth 2 pts or more, I still recommend a stop of slightly treater than 2 pts though, it's up to your discretion.

Gaps
1. The Support, Pivot and Resistance areas are established based on the previous market's OHLC, so therefore, it is very natural and makes sense that any Gappage, either Positive or Negative, would affect how the market reacts to previously established valuation levels.

To incorporate this information into the overall model, use the following rules:
a) If Gap is in the same direction as the Pivot Trend, enter a trade at the pullback (Continuation Trade), anticipate holding for 4 pts or until the next level of Support / Resistance is hit.

b) If a Gap is in the opposite direction as the Pivot Trend, add 4 pts to to R1 for the first opportunity to Go Short the move, and subtract 4 pts from S1 to the first opportunity to Go Long the move.

The Gappage represents new information in the market (after hours) and the previously established value levels have to be modified.

Here are a few examples:

 

[JimmyJam]

Gap with the Bullish Trend