pivot point interpretation

[wsam29 10]

how do most of you interprete pivot points?

 

that is one reason I don't really use them but I tried it on 30 jan 07 and I had mixed reviews about it.

 

take for instance, the price is trading back and forth over and under the PP, what good is it if price action "ignores" it.

 

What steps to take to avoid over trading the chop?

 

From my understanding of pivots, above PP, look to buy the test and sell at R1. of even buy the moment it crosses above PP for "aggressive" trading.

 

What happens if price does not reach R1 but stops a few ticks short on two attempts, market saying weaker than it really is and a decline in possible?

 

Or is it a handful of discretionary indications as well?

 

oh the joys of market information perception.

 

I used arrows to plot potential entries and exits based on my criteria, made one trade for the day +11 and then tested my "methology" in real time to see how my judgement did.

[Soultrader 12]

I'll try to add my input on this. I started off initially as a pivot point based trader. Ive added Market profile, tape, and market internals ever since so I am pretty comfortable using pivots into my trading style/methodology.

 

Here's the thing. Pivot points are excellent for entries. Im comfortable with the risk and entry can be made ahead of the crowd. Stops are usually placed 10 pts on the YM from my entry. However, I find that one needs to truly understand market internals to trade pivots with a higher probability of winning. Internals tell alot if the pivot is going to hold or break. 3 things I watch for: market internals, volume, and tape. I particulary like when price violates a pivot by a few ticks, price rejection on tape, and then back below/above the pivot. In my opinion, its alot easier to trade off pivots when combining another analysis such as; double top at a pivot on lower volume or price & TICK divergence at a pivot.

 

Also pivots are not exact science, so price can fall short of reaching a pivot and reverse. You can look to use midpoints to partial out of your trades. I tend to exit a few ticks before price reaches the next line of pivot. "Dont be a dick for a tick". Trying to squeeze that 1-3 tick is alot more costly. :p

 

On Jan. 30, 2007 the YM pretty much wiggled inside value the majority of the time indicating a balanced and choppy market. My best advice is for you to spot this out within the first 30minutes and just stay away from it. I got chopped out with 2 pivot plays on the ER2 that day. A couple of steps I use to identify chop is by reading the tape early at the open and the 30minute range. If volume is low in the first 15-30min... you can pretty much expect a dull market. Im no scalper so most of the time I'll try my best to stay away.

[wsam29 10]

We share a very similar view towards analysis, what through me off today was that choppy action back and forth PP of 12533.

 

I was considering shorting the market when YM touched R1 of 12571, ER2 made new high, NQ did not confirm, ES did the same as YM so in hind site, that was a very good trade since the other indicators all lined up, divergence on ticks and if you follow candle sticks, a hammer I think it is called? or all I care about is a long upper shadow or wick, which ever its called. the thing that prevented me from taking that trade was volume, there was not much on the break of that 5 minute hammer.

 

I would have surely taken that trade if there was a token print above 12571, for sure! having been screwed on many 1 tick higher going long trades, I know what it feel like when the whole market does not agree with you.

[wsam29 10]

Soul, I noticed your pivots are slightly calculated differently...any reason why you decided to use the range rather than the normal classic calculations of highs and lows?

[Soultrader 12]

I think the only calculations that are different is the R3 and S3 pivots? If you prefer a different formula for the indicator, you can edit the EL coding... its fairly easy.

 

I think I just shortened the formula by using range where the classic version usually states (high-low) which is the same thing as range.

[Anonymous 11]

how do most of you interprete pivot points?

 

I will start with a key definitional mistake most people make.

 

Pivot Points are the lowest low in a swing move or the highest high in a swing move. That is, a swing high is a Pivot High and a swing low is a Pivot Low. When the market is making higher Pivot highs and higher Pivot lows, it is said to be in an uptrend. Conversely, when a market is making lower Pivot lows and lower Pivot highs, it is in an uptrend.

 

Floor, or key, numbers are numbers, or areas, where price may react/stall/ or reverse. Therefore, a floor number may become an pivot area IF AND ONLY IF the market makes a Pivot High or Pivot Low at that area or number.

 

The point here is that as traders we should be watching these areas for price to do certain things before we consider the area a Pivot area (line). Floor numbers are inferred support/resistance. That is, the numbers these lines represent are not necessarily places where the market has previously found support or resistance. Many people believe that these lines will act as support or resistance, but that believe is not grounded in the fact that the lines (areas) already have. This is what distinguishes floor numbers from Market Profile support/resistance numbers.

 

Are you watching for expanded volume and ranges as price trades towards a key number? If the Smart Money wants to take prices through a true area of support, you will see Volume backing the move. If the range of the bars is narrowing and volume is falling off, then it is more likely that the area will hold. Which means it goes from an inferred support/resistance area into an actual support/resistance area or Pivot area.

[wsam29 10]

here's another one, what closing value do you use?

 

the exchange settlement or the chart closing price?

 

My thinking is the chart closing because I sometimes get lazy and not do the pivot updates right away based on the exchange settlement closing price.

 

Thoughts from everyone?

[Soultrader 12]

I use the following times: 6:15pm - 4:00pm.

 

For TS, I just take the values straight from the daily charts. However, I use a 9:30am Eastern open for my gap charts.

[wsam29 10]

Soul, have you tried the "Floor trader pivot" indicator that comes with Tradestation?

 

I think it uses the exchange settlement close for its calculations because there was a difference between using the chart close and the Floor trader close.

 

Their are pros and cons to each indicator.

 

I for one do not like to enter High, Low, Close everyday, but I also don't like my charts compressed. Floor trader pivots does that since will will plot all pivot leves if you want it to.

 

I did however get some ideas and observed with pivots.

 

Price slice through either up or down on good volume, go with it, or wait for retest of pivot for a continuation move.