Lots of pivots

[mister ed 10]

Before each RTH session on the ES I prepare the “pivotsâ€Â, the classic floor trader pivots plus others that are not strictly pivots but I call them that. The ones I use are:

 

The classic pivots I already mentioned, from the top:

R3, R2, R1, PP, S1, S2, S3.

I also make sure I have Yesterday’s H, L and C.

I also have the overnight trading’s H and L.

And finally yesterday’s VAH, POC and VAL.

When the RTH session opens I also make note of the opening price and use that too.

 

Can I be honest here, I HATE doing this. I wont draw these levels on my chart, the chart looks like a football field if I do, I just have them listed, from the highest to lowest next to me to refer to. Why do I do it? Well as you are all no doubt aware the market tends to respects these levels.

 

When I say this, I mean they are generally respected as zones of support or resistance, not meant to be relied on to the exact price, and as often as not completely disregarded. If I ever figure out the exact prices that are going to hold, I will be sure to let you all know.

 

Trading for Tue. Nov. 6 (2007) was a great example.

I had the o’ night high at 1514.75, R1 at 1515.25, & Monday’s high at 1516.25. That’s 3 in the space of 7 tics.

The first little swing up got to 1515.75, right between R1 and Monday’s high, tested there twice.

Then swing down to 1511.50, 3 tics below the VAH for Monday at 1506.25.

 

Next swing up to 1516.50, one tic above Monday’s high.

 

Extended swing then down to 1503.50, with pivots just above it 1503.75 (Monday’s close) and 1504.75 (the day’s PP).

 

Next good swing up to 1511.75, 2 tics below Monday’s VAH.

 

I wont go on, and I am not really sure what my point is. I suppose my point is that I am quite capable of looking at a chart and coming up with reasonably good support and resistance zones myself and then monitoring how the market is trading when it gets there and making my decisions accordingly. What I don’t get is these pivots, apart from yesterday’s H, L & C and today’s open) are just there because they are there…(Let me just add that I think the VAH, POC, and VAL pivots are rock solid and well founded in science – there, now I should avoid the death threats from the MP crowd).

 

Does anyone have any thoughts on all these pivots, using them, not using them and so on?

[waveslider 10]

I think they used to be used more often when they gave a greater edge to the floor traders. That was when it was more of a boys club and they gave the wink as everyone got faked out at those levels.

 

Now they're just points of reference like a 50 and 200 day MA. Psychological levels. I think you could visually look for congestion levels on a chart, weighing recent action more heavily, and do better than these lines. That's all MP is anyway..

[brownsfan019 17]

Does anyone have any thoughts on all these pivots, using them, not using them and so on?

 

I think you'll find ed that some days these lines are heavily respected (coincidence or not) and other days they are useless. I've toyed with the pivots, mp #'s, etc. as you have done here and they did ok for me. I was mainly testing them out for exit points, not entry points though.

 

It really comes down to if these make money for you or not. If they work over time, then I would use them! If the results are marginal, consider removing them.

[darthtrader 10]

Now they're just points of reference like a 50 and 200 day MA. Psychological levels. I think you could visually look for congestion levels on a chart, weighing recent action more heavily, and do better than these lines. That's all MP is anyway..

 

Totally agree. I actually wouldn't doubt that plotting previous day high low and close wouldn't do better than deriving some averaged levels from these levels. I think its interesting that if you randomly draw a line on a chart, you can probly convince yourself that price is respecting that level to some degree even though its just random.

I could even see from an MP standpoint how pivots would have been good for locals even just as a risk management tool so that they weren't trying to make markets at those levels and get caught hugely lopsided if the market moved in one direction heavy. Considering you can do much more in depth analysis at home behind a screen than in the frenzy of a ring, I just don't see why anyone would bother with pivots.

[mister ed 10]

Thanks Waveslider, BrownsFan and Darth - I suppose these things work as reference points, just I seem to have so many of them.

 

And Darth,

"I think its interesting that if you randomly draw a line on a chart, you can probly convince yourself that price is respecting that level to some degree even though its just random."

I think you are right...which is scary - LOL!

[Anonymous 11]

Thanks Waveslider, BrownsFan and Darth - I suppose these things work as reference points, just I seem to have so many of them.

 

And Darth,

"I think its interesting that if you randomly draw a line on a chart, you can probly convince yourself that price is respecting that level to some degree even though its just random."

I think you are right...which is scary - LOL!

 

You mock, but this is actually a very subtle way to understand pivots. That is, one should be using them to focus attention of price patterns, volume patterns, indicator changes :doh:, et all. In other words, just because price moves down towards s1 you should not go long. But you should start paying more attention to what price does as it nears this area.

[mister ed 10]

You mock, but this is actually a very subtle way to understand pivots. That is, one should be using them to focus attention of price patterns, volume patterns, indicator changes :doh:, et all. In other words, just because price moves down towards s1 you should not go long. But you should start paying more attention to what price does as it nears this area.

 

Hmmmmmm, your 1st point (me mocking using these price points) - guilty... I will often use a humourous (hopefully) approach to discussion points.

 

Your 2nd point, using pivots to focus attention on price behaviour, i.e. using them as reference points in assessing current price action - I think Linda BR has an article about doing just this - I fully agree with you. I do wonder though that if just picking a random price point and using this as a refernce point might not very well be just as valid...food for thought.

 

I suppose some elaboration on my initial post might clarify my ideas a little, to me if to no-one else at least! I use reference points generated by price activity - this is why I place more credence on yesterday's high, low and close, and today's open as against derived prices, whether that be through floor pivot calculations or MP calculations, or Fibs or whatever else is derived rather than direct. I also use prices generated through the sessions trading - swing highs or lows for instance, i.e. prices from where the market changed character, swing moving from up to down for example. These to me are more valid "pivot points" (for want of a better term) and useful as future reference points.

[mister ed 10]

One more thing...just re-reading your post PP,

 

"In other words, just because price moves down towards s1 you should not go long"

 

No, dont go long just because price is moving towards S1, this would definitely be a cause for :doh: