The Next Step

[FTSE Beater]

Hi all

This is going to be a continuation of “The basics of trading” thread http://www.trade2win.co.uk/boards/showthread.php?s=&threadid=4629.
I wanted to start a new thread, as this is a step away from the core basics of trading and moving onto the more advanced areas of trading. I MUST stress that the above thread contains all the skills necessary to make money.

Hope you can take something from this thread.

 

[FTSE Beater]

Pivot Points

Hi all

Pivot points are mathematically based areas of support and resistance that were very popular with <br>floor / pit traders, who didn’t have access to live charts – so they worked and traded off these numbers.

The calculations for the pivot points are:

PP = (High + Low + Close) / 3 ( high, low and close for previous day)
1st Res = 2*PP - Low
2nd Res = PP + (High - Low)
3rd Res = 2*PP + (High - 2*Low)
1st Sup = 2*PP - High
2nd Sup = PP - (High - Low)
3rd Sup = 2*PP - (2*High - Low)
Courtesy of a post by ChartMan

This website does the calculations http://www.pivotpoints.co.uk/ (although I’m not sure what Woodie’s versions are).

I find that the values for Pivot Points work best as exit signals rather than entry signals – mainly because <br>these areas usually form congestion, and I don’t like having trades open during congestion.

This is a great example of a pivot point, and it is a screenshot that I took in the week for the Eurostoxx50. <br>After a solid uptrend, price haulted around the pivot (yellow line), formed congestion and then started to reverse.

Chart courtesy of Helenqu

This was a screenshot from Thursdays trading on the Eurostoxx50 and the pivot at 2214 when<br>first tested held strong, and started a reversal move of some 25 points.

On the second test it failed only to pull price back below it. I doubt the Pivot was the only thing bringing <br>the index back below 2214, but it certainly was a factor.

The pivot was tested from the open on Friday, and the price started an uptrend until it hit the <br>1st Resistance level (green line), which lead to a consolidation pattern.

Chart courtesy of Helenqu

Once the pivot at 2181 had gone, the Eurostoxx made a steady decline, until it hit the next pivot. It <br>also formed the head of the head & shoulders pattern.


The above 4 examples were taken in the last 4 days. These weren’t charts that I had to scan back<br> for, because the pivot points work so well on the Eurostoxx and I believe them to work equally<br>well on any other index.

I wrote back in November that I didn’t believe PP’s worked, but that was because I was looking at stocks,<br> and to me they don’t have the same effect. It’s important to remember that PP’s are another <br>form of Support and Resistance – they don’t work clean every time, but what kind of S&R does?

Constructive comments always welcome.

 

[neil]

The red ema in the above examples.....is it the 34ma ?

If so its interesting how the price reacts around it.

 

[FTSE Beater]

Hi Neil

Trust you to move onto the next subject (moving averages) before finishing with this one

I presume you mean the red EMA on Helenqu's chart - In which case it's the 30 EMA Low, so its the moving average of the low values. Why you didn't work that out I don't know :cheesy:

The green line is the 30 EMA High

HTH - apologies Helen if I jumped in ahead of you.

 

[ChartMan]

FTSE, can you edit and re-post your last chart above- its too wide...

 

[TBS]

Hi FB,

You missed a few out, here is a full list of levels that are often referred to as pivot points:

[b]Daily Open[/b]	Previous day’s open/can act as support and resistance in intra day trading.

[b]Daily High[/b]		Previous day’s high/potential resistance point.

[b]Daily Low[/b]		Previous day’s lowest point/potential support point.

[b]Daily Close[/b]		Previous day’s close/settlement price.

[b]Pivot Point[/b]	Previous day’s (high + low + close) /3 = Pivot Point psychologically important in next day’s Trading – breaks of pivot signify a move to lower	or higher prices.

[b]Regular High[/b]	2 x Pivot Point – Daily Low = Regular High. This is the projected upside for the next day’s Trading.  Any Early break should indicate a trend day.

[b]Regular Low[/b]	2 x Pivot Point – Daily High = Regular low – projected downside objective for the nest day’s trading.  Any early break indicates a trend day.

[b]Extended High[/b]	Pivot Point + High – Low = Extended High  - signifies a trend day.  Market must move significantly above this point to move higher the next day.

[b]Extended Low[/b]	Pivot Point + Low – High = Extended Low – signifies a trend day.  Market must close below this level to imply a change in trend.

[b]High Break[/b]	               (Previous day’s trading rage x .75) + Close = High Break.  Any break and close above this point from a new market low is an early warning signal of an Imminent change in trend.

[b]Low Break[/b]	              (Previous day’s trading range x .75) – Close = Low Break.  Any break and close below this point from a new market high is an early warning signal of an Imminent change in trend.

[b]Mid Point[/b]	              Daily High + Daily Low /2 – similar to the Pivot Point – idea is to sell or buy crosses respectively.

[b]Pinnacle[/b]	              2 day moving average of close – indicates short-term market strength or weakness.  

[b]Volatility Break-out Upside[/b]         Same a High Break.

[b]Volatility Break-out Low side[/b]       Same as Low Break.

Not all are mathematically calculated, but are obvious support/resistance levels such as previous day lows/highs etc. Like all these things, they sometimes 'work' and other times don't - at the end of the dayit all boils down to trend/support & resistance.

 

[FTSE Beater]

Hi CM

All done - sorry about the original post.


Hi TBS

Thanks for put those up

 

[Les Carlin]

Low Break (Previous day’s trading range x .75) – Close = Low Break. Any break and close below this point from a new market high is an early warning signal of an Imminent change in trend.

Sandy,

This formula yields a negative number. Shurely its:

Close - Previous day’s trading range x .75)= Low Break

?

 

[TBS]

Hi Les,

yep, sorry about that.

.. not that I use them anyway

 

[lovely patrica]

the next step

Hi all

Pivot points are mathematically based areas of support and resistance that were very popular with <br>floor / pit traders, who didn’t have access to live charts – so they worked and traded off these numbers.

The calculations for the pivot points are:

PP = (High + Low + Close) / 3 ( high, low and close for previous day)
1st Res = 2*PP - Low
2nd Res = PP + (High - Low)
3rd Res = 2*PP + (High - 2*Low)
1st Sup = 2*PP - High
2nd Sup = PP - (High - Low)
3rd Sup = 2*PP - (2*High - Low)
Courtesy of a post by ChartMan

This website does the calculations Pivot Points Login (although I’m not sure what Woodie’s versions are).

I find that the values for Pivot Points work best as exit signals rather than entry signals – mainly because <br>these areas usually form congestion, and I don’t like having trades open during congestion.

This is a great example of a pivot point, and it is a screenshot that I took in the week for the Eurostoxx50. <br>After a solid uptrend, price haulted around the pivot (yellow line), formed congestion and then started to reverse.

Chart courtesy of Helenqu

This was a screenshot from Thursdays trading on the Eurostoxx50 and the pivot at 2214 when<br>first tested held strong, and started a reversal move of some 25 points.

On the second test it failed only to pull price back below it. I doubt the Pivot was the only thing bringing <br>the index back below 2214, but it certainly was a factor.

The pivot was tested from the open on Friday, and the price started an uptrend until it hit the <br>1st Resistance level (green line), which lead to a consolidation pattern.

Chart courtesy of Helenqu

Once the pivot at 2181 had gone, the Eurostoxx made a steady decline, until it hit the next pivot. It <br>also formed the head of the head & shoulders pattern.


The above 4 examples were taken in the last 4 days. These weren’t charts that I had to scan back<br> for, because the pivot points work so well on the Eurostoxx and I believe them to work equally<br>well on any other index.

I wrote back in November that I didn’t believe PP’s worked, but that was because I was looking at stocks,<br> and to me they don’t have the same effect. It’s important to remember that PP’s are another <br>form of Support and Resistance – they don’t work clean every time, but what kind of S&R does?

Constructive comments always welcome.

really a great thanks to this post.especially the pics it helps me alot to understand what i should understand.so keep it up.

 

[Hoggums]

I think patrica wins the reviving the oldest thread award.

 

[gonnamakeit]

is this thread going to continue ?