Daily Pivot Range and Pivot Scoring

Discussion in 'Strategy Development' started by FaderTrader, Mar 13, 2006.

  1. I've just begun applying Mark Fisher's (The Logical Trader) daily pivot range calculation with his pivot scoring method - and over the past 10 days it has been highly accurate (9 of 10 days).

    Today, for example, is when I would normally fade (Friday's rally). Granted, I might not have gotten obliterated shorting this market, but I certainly would have had a harder time making money today than normal.

    However, when calculating today's pivot range and using the Fisher 30-day Rolling Pivot Score, all of my stocks, the Dow, and the S&P pointed to a net bullish bias.

    It's worked nicely and I'm wondering if other traders have had success using either daily pivot ranges or rolling scoring systems. I'm not expecting you to give away the Golden Sauce, but since this is new for me, I'd like to know if anyone has applied this, over time, with success.

    Thanks!
     
  2. I$land

    I$land

    I am not familiar with this method but it seems interesting.

    Could you elaborate a bit on this technique ?

    Did you back test it ?

    Cheers,

    I$land
     
  3. The daily pivot range is derived using end-of-day data. The pivot range derived applies to tomorrow’s trading range.

    1. Pivot price (also equals formula for a pivot point) = (high + low + close) / 3
    2. Second number = (high + Low) / 2
    3. Pivot differential = daily pivot price – second number
    4. Pivot range high = daily pivot price + pivot differential
    5. Pivot range low = daily pivot price – pivot differential

    I mark the chart with the top of bottom of that range and shade it in blue.

    I’ve also programmed e-signal to mark the top and bottom of the Opening Range (first 15-minutes of trading) automatically with two yellow lines.

    I use the Daily Pivot Range and the Opening Range as my guides combined with the NYSE Open Book to place trades.

    Daily Bias

    I derive my daily bias in 2 stages.

    Stage 1: Pivot Range Bias

    If today’s close is above tomorrow’s pivot range, then I am bullish;
    If today’s close is below tomorrow’s pivot range, then I am bearish;
    I today’s close is within tomorrow’s pivot range, then I am neutral or mixed.

    Stage 2: 30-day Rolling Pivot Score

    Take the last 30 TRADING days (download them in Excel from yahoo). Apply the pivot calculation to each day.

    ***If the close price for today was ABOVE the pivot range for today (remember: today’s pivot range is calculating using yesterday’s data), then today was a PLUS day.

    ***If the close price for today was BELOW the pivot range for today (remember: today’s pivot range is calculating using yesterday’s data), then today was a MINUS day.

    ***If the close price for today was within the pivot range for today (remember: today’s pivot range is calculating using yesterday’s data), then today was a NEUTRAL day.

    Deriving the Daily Bias:

    There is a statistically significant correlation between what occurred 30 trading days from today. So, if 30 days ago we had a PLUS day, then all else being equal, it’s more likely today will be a plus day as well.

    I take the Pivot Range bias and combine it with the 30-day rolling score to derive a net bias.

    So…

    If Stage 1 and Stage 2 are both bullish, then I am NET BULLISH.
    If Stage 1 and Stage 2 are both bearish, then I am NET BEARISH.
    If Stage 1 and Stage 2 conflict with one another, then I HAVE NO BIAS.

    Let’s take today. I trade AHC, PD, and PGR. All three had a net Bullish bias. So did the Dow. So did the S&P. Yes, we've had some profit taking, but going market-on-close on Friday would not have been a winning strategy.

    And, three months ago, I would have been trying to fade Friday’s rally all day long and probably would have broke even (gross) and churned all day long.
     
  4. Surdo

    Surdo

    Wow!

    This is new and unique.
    I don't think anybody has ever tried this before.

    Lemme' know how this works out for you.
     
  5. Are you serious? Because when I started testing it, I felt pretty stupid for taking so long to find a decent trend-following system. I was hoping to at least get some positive or negative feedback on the experience of other traders who've tried it.
     
  6. duard

    duard

    Have you ever looked at George Douglass Taylor's Book "The Taylor Trading Technique," An oldie but goodie which I believe was originally published in 1950 and is similar to this type of analysis. I think you can still find reprints.

    Good Luck