I'm looking for maybe a book, article or webpage that discusses the logic behind the floor pivot numbers , perhaps the history of who invented it and what reasoning they based their formula on. Or if anyone knows the answer that would be great.
prox - There are a hundred places to find this - just do a Yahoo or Google search. It's so old (pre-PC) and been replaced by other calculation methods that like so many of these floor trader "secrets" it's all over the place. It still works OK sometimes, but often misses by a bunch of points or breaks down completely when you need it the most because the big guys (and their computers) are looking at different numbers. Good luck.
Just a wild ass guess - but it seems like pivot numbers were an attempt in the pre-floor computer days to mimic an intraday moving average. The pivot usually is near the 20 period ma on a 15-minute chart at the beginning of the day. The S and R numbers usually are near a Bollinger/Envelop/ect. based on the 15-minute ma. If this is true, then the weakness of the pivot would be that it doesn't adapt to intraday price changes as the day goes on.
Hey! you guys are missing the point. Everybody knows where to get pivot numbers, calculators, formulas etc., but the question is: "Who thought this up? Who invented the formula? What's the history behind this?" kp
I've noticed plenty of little nuances just off the numbers.. if we've had an uptrend the prior day, R1 and R2 are usually smaller in range and the S1 and S2 are wider apart. Therefore, it is much easier for price to trade up and it will take a ton for price to head down to the S1 and S2 level. Likewise, the reverse is true for shorts. Also, some people consider that the market in an uptrend would never be weak enough to trade down below the S1 level even in retracement days unless there was true weakness and may signal a reversal. Other logic behind pivot numbers are floor traders like to bounce around between R1 and S1 and any move outside of this range indicate a swing trading force that pushes the market out of balance into a trend. After a large trend day, the calculated distance between the pivot levels can often be relatively large with price chopping along on low volume and maybe just touching one pivot level the whole day. Traders who base their strategy off these numbers will have no trades all day since they are never reached... thus perhaps contributing to the chop. The reverse is also true for narrow ranges, where the following day may reach 4 or 5 different pivot numbers .. increasing trading activity and perhaps a trend... ala NR7 and WR7 type days. Surely, this is no coincidence and someone must have formulated the numbers off of something.
Standard pivots are posted all over the web on many sites. They are sometimes closeto, but not the the real thing. Futures traders rely heavily on pivots or price maps which are derived from a combination of MACD's, MA's, Stochs, RSI's etc. in addition to lots of statistical data. It is the bread and butter of the scalper and daytrader who trade a counter-intuitive method against R&S levels, part of the price maps ( which include pivots among other trading ranges/levels). The real good ones cost you and are published by proprietary outfits that sell the info to institutions and others for a good penny. It's well worth it. I have always found that the big boys are not really as smart as they would like us to believe - they simply have the money to buy the information or services from people who really are smart.
does anyone know the formula to find resistance and support three(R3,S3). Different caculators getting different numbers http://www.stelaronline.com/resource/pivot.htm uses R3=2*PP+(H-2L) S3=2*PP-(2*H-L) and Simple-as-123 calculator uses ?