Pivot Ranges: Useful Tool or Snake Oil?

Discussion in 'Technical Analysis' started by bluedemon77, Aug 10, 2006.

  1. Thursday

    comment: price opens above 1st support and makes a slow acension to the median pivot
     
    #21     Aug 11, 2006
  2. ... soooooooooooo, in the final analysis, if you are good at Table Tennis or the old Arcade game of "Pong", you will do a helluva good job trading the pivots.

    best,

    jj

    P.S. Obviously, I don't use them. They mean different things at different times. While they could be useful as potential price targets (that every trader and his grandma knows), I'd rather not trade of 'em.
     
    #22     Aug 11, 2006
  3. I have done some extensive research on pivot points and the etf SPY this summer. Here are a few of my findings, based on research going back to early 1999.

    1. For daytraders, buying breakouts of R2 and S2 has been marginally profitable, but once you add slippage and commissions, all profit goes away (and more).

    2. Buying strength (buying on stop at R2) is much less profitable on a 1, 2, 3, 4, 5, 6, 7, 8, 9, and 10 day basis than buying weakness (buying at S2 with a limit order). In other words, buying strength for the SPY is a losing proposition (measured by the relationship of potential profit to potential loss).

    3. Buying at S3 and holding eod has been a winning bet the last seven years (no bullish bias over those years). SPY does not get to the S3 level often, but when it does, it has led to a 29% annual gain (not compounded, note).

    4. Many daytraders watch the ES and watch the pivot levels to see what the market does once it gets there. If it looks like support will hold, buy; but if it looks like it won't (market blows right through), then sell. I cannot tell you how well that works, but there is a journal here (S/R journal) devoted to that approach.

    Good luck. :)
     
    #23     Aug 11, 2006
  4. I know nothing about pivots, but I don't need them at all.

    it is true there are so many ways to exploit the price moves
     
    #24     Aug 11, 2006
  5. Hello again:

    I think its natural to feel some frustration when you read about a system this simple, and yet you have failed to make it work.

    We all have our talents, and our limitations, so I can't criticize, but I do think that much of my own success has to do with the fact that I arrived at MY OWN RULE SET, BY OBSERVATION. This is why I mention it in my post. The book I referenced is only a starting point, not an "be all, end all" solution. I do think that a trader has to put it on the line and say "either I get this to work in x days, weeks, months, or I assume that it isn't for me and look somewhere else"....

    Good luck,
    Steve
     
    #25     Aug 11, 2006
  6. bluedemon77

    bluedemon77 Guest

    Steve, I understand what you are saying about reacting, not predicting. This is a matter of symantics. In fact, any time you buy or sell securities you are predicting that some trend will continue (i.e. you are "reacting" to it) or is about to end, true? I already learned not to try to call the tops or bottoms and I assume that's what you mean.

    Thanks for your book recommendation and explanation. I guess what confused me was I was watching prices flip back and forth through these pivot ranges and could not see how they could aid my decision making. In Fisher's book he basically says if the prices stay above the top pivot for 7.5 minutes, that means you're bullish until they go below the lower pivot for 7.5 minutes, in which case you're bearish. Looking at that alone, it was not apparent how that would improve my decision making ability beyond what looking at the chart was already telling me. I only read the first few chapters so far, so maybe it will have a better explanation of the finer points later in the book. I was just "test driving" pivot ranges with my own data and wanted to know if anyone found them valuable.

    Chuck
     
    #26     Aug 11, 2006
  7. bluedemon77

    bluedemon77 Guest

    Thanks for you suggestion and the presentation. I'll check it out.

    Chuck
     
    #27     Aug 11, 2006
  8. bluedemon77

    bluedemon77 Guest

    JJ, I guess this is where I was coming from. Unlike the examples you posted, the charts I was looking at didn't even show the pivot lines acting as support and resistance very consistently. Maybe the charts I was looking at were peculiar or maybe as Steve pointed out I just do not understand the finer points of this analysis.

    Chuck
     
    #28     Aug 11, 2006
  9. Hey Bluedemon77,

    Steve has had a lot of good things to say to traders here, pointing them in the right direction.

    If you read the Logical Trader and then check out Person's book (he's supposed to be coming out with a second one which gives a lot detailed strategies) I'm sure you can do well.

    But it isn't an easy I=yes and O=no kind of trading. It's going to take a lot of effort ... I guess I'm just looking for a little easer approach to the markets, which may or maynot be doable.

    Later,

    Jimmy
     
    #29     Aug 11, 2006

  10. I find that waiting for price to "stay" above a pivot is problematic.

    My own solution to this is to make up my own rule for the markets I trade. On an intraday basis (excluding summer), I wait for price to CLOSE above or below my line in the sand (pivot, support/resistance, previous congestion area, whatever). Then I call that my new trading range and try to find entry. Again I use my own rule set depending on what I have observed through time. I may for instance enter on the next bar/candle open OR I may wait for the next bar/candle to exceed the high or low of the previous bar. Whatever rule set you develop, it has to make sense to you and it has to test profitable. Also you will need to decide on a stop loss system. If you understand the idea of "tests" what comes to the fore is that you are developing a way of looking at how other market participants are thinking..IF you get that, then you can start to move to phase II, which is to think a couple steps ahead of the next guy.

    FOR instance, we have all had the experience of entering after price moves through an area of congestion, only to have it retrace, washing us out for a loss, and THEN resuming its course, only we are now on the sidelines watching. How do you solve this problem? Do you scale in? entering a small position at first, and if it works out you add, do you wait for that retracement and risk being left on the sidelines if price continues without you? Do you increase your stop size? Much of what we do as traders is about problem solving and about anticipating what the other traders are doing. For index traders, we should be aware that programs are setup to "strand us". Just take an intraday chart (ex summer) and check out the wide range bars, then scan left and see where the previous folks have got stranded... This is how smart money, banks, funds, etc create support. Just a couple of ideas to think about.

    Steve
     
    #30     Aug 11, 2006