Pivot Points,,,,something from MBT from a few days back..so many connotations of many of the terms we deal with TA, including pivots when referencing time frames...
MTrader TA Lesson - Pivots
Feb. 4, 2001
This email is a lesson for traders to help understand how to identify and trade a "pivot". First of all, one must understand exactly what a pivot is, a pivot is simply a point
where it is believed that a minor change in direction could take place. The reason the change is considered minor is that the play can be effective as a trade against the
overall trend while the overall trend remains intact. In other words, a downtrending stock can be triggered as a long ( buy ) pivot even though it is in a prnounced downtrend
and vice versa for short ( sell ) pivots. There are some important things to know when deciding to trade a pivot:
Things to know when trading a pivot:
1.It is a bounce or correction play, so understand you are fighting the overall trend of the stock and perhaps the market.
2.Gains made on these types of trades vary, but are generally closer to a scalp type play of 1-2 points. (gains can be much larger or smaller depending on the time
frame used this example is based off the most frequently traded pivot, the 15 minute pivot.)
3.Execution speed is key because you are fighting the trend and it can resume at any time and the trade can fly fast against you. (this is unlike a breakout where you
trade in the direction of the trend and when the stock moves against you there is more time to react.)
4.These higher risk trades for more experienced traders.
5.Keeping stops is absolutely the most important part of this or any trade.
6.These trades are better when not partialed. (partialing is taking gains on a portion of shares while allowing the rest time to possibly further gains, once again gains
depend on time frame.)
7.Pivot plays are higher in risk/reward ratio but tend to fail more often than many other plays.
What is a pivot:
1.A pivot is a point where a minor change in direction is believed to occur.
2.The best pivot plays occur after 3-5 bars in one direction, with one or more bars on stronger than normal volume, then finally near the bottom/top of the trend a doji
candlestick bar*, spinning top candlestick bar*, or inside bar*.
3.The pivot occurs when the high/low of one of these bars is breached signaling the direction change.
4.This is the trigger and the entry point for such a trade, and depending on timeframe should not be chased more than 1/4-1/2 point from entry.
5.The stop loss for this trade is generally placed at the bottom of the bar where the high/low breach is used for entry.
6.Pivot expainations pivotpointanalysis.com
7.* Explainations of candlestick chart terms litwick.com
8. Pivots can be best identified off 5,15,60 and daily charts. The longer the timeframe, the wider the stop and in general larger the gains.
In the next few days I will email some charts that identify pivot trades in each of the above mentioned timeframes.I hope this has been informative and please feel free to
email questions to Allen@mtrader.com or dcc me in the room.
Allen |
