Following my study of the percentage of high/lows that are matched by supports/resistances calculated by pivot method, I just finished to code a simulator to back-test intraday signals. Well, results are just incredible. I am now finding ex post the best stop loss and entry signal points. If some people are also working on this, ready to share thought, experience, simulator Thanks
Look at entering at the open of the first bar after a higher low or lower high once the pivot level has been reached. In other words, if a PL is 1000 and the price hits that in an uptrend, then the next bar has a lower high, enter at the open of the bar after that. If this still doesn't make any sense, I'll PM you. As for the stops, are you talking about the initial loss-limit or the point at which you want to exit the trade?
I am talking at the initial loss limit. For instance I fixed it at 3 points from Pivot Line for DAX & CAC. For the signals , I enter the position if price is just 1 point from the PL. for instance, dax up to 3618 (pivot line is 3619), I sell at 3618 with a stop loss at 3619+3=3624. Right now, in my simulation, positions are closed if they are stopped or if I buy back on the lower support (calculated by pivot). I am also trying to fix a profit gain of let's say 15 points (risk reward of 15 to 4). But your comment is very interesting: It could cancel a lot of noise in my simulation. Do you trade the privot line differently than the 2 supports & resistances ?
As for the initial loss-limit, all you can do - unless you've found an easier way - is to go over chart after chart after chart and see just what the maximum adverse excursion is after the entry, under your rules, would have been triggered. You will find that over a vast majority of case, the price will not fall below n points. If it does, the trade nearly always fails for what would be an unnecessarily greater loss if the initial loss-limit were increased. However, there will be cases where the initial stop is hit and the trade turns out to be successful. If this is only occasional, then you'll either have to get used to it and accept it and be satisfied with taking a continuation entry, or increase your initial stop and accept the larger losses. As for trading the various pivot levels differently, not really. At least I'm not aware of it. If I am trading them differently, my journal should make that clear.
fortuna, i've been considering the virutes of pivots lately based on the successes of others and i'm interested in your work. can i ask how good the simulated equity curve is? would it be possible to request a screenshot of it (either pm or posted)?
Could u give an example ? I want to be sure I get what u say ? I will post results of my back testing when over
I can give you an example from this morning that involves a little discretion. The NQ stopped its decline at 1020. The 1025 bar had a higher low. Ordinarily, I'd enter on the open of the 1030 bar. However, after a decline of 20+ points, I didn't see the NQ as bouncing strongly and never looking back. So, I waited for some sort of test. This came on the 1035 bar, which made a double bottom. The 1040 bar had a higher low, so I entered on the open of the 1045 bar. This wasn't good for much, but it was better than nothing. Incidentally, you could have entered on the 1030 bar anyway, but that would mean placing the stop below the low of the 1020 bar, and that's a bit too wide for a lot of people.
Our hedge fund uses pivots all the time with a great degree of success. I use them as stop loss points as well as potnetial entry levels. I stick to the very basic % 25 and 75% pullback pivots. I have my alerts set to these and just keep looking as stocks come across.