"I hear that you drop some money in Wall Street. Were you a bull or a bear?"
"Neither, just a plain simple ass."
Tuesday, December 23, 2008
Friday, December 12, 2008
Trading With Pivot Points
The pivot point bounce trading system uses a short term timeframe and the standard daily pivot points, and trades the price moving toward, and then bouncing off of any of the full or half way pivot points.
Pivot points are support and resistance levels that are calculated using the open, high, low, and close of the previous trading day. The pivot points include the pivot point itself, six full support and resistance points, and four half way support and resistance points, and are collectively referred to as the pivot points. When the price approaches a pivot point (especially for the first time in each direction), it will have a tendancy to reverse, and it is this reversal that is used by the pivot point bounce trading system.
The default trade uses a 1 to 5 minute OHLC (Open, High, Low, and Close) bar chart, and the daily pivot points. The chart timeframe can be adjusted to suit different markets. The default trading time is any time that the market is open, but for best results the market should be active.
Pivot points are support and resistance levels that are calculated using the open, high, low, and close of the previous trading day. The pivot points include the pivot point itself, six full support and resistance points, and four half way support and resistance points, and are collectively referred to as the pivot points. When the price approaches a pivot point (especially for the first time in each direction), it will have a tendancy to reverse, and it is this reversal that is used by the pivot point bounce trading system.
The default trade uses a 1 to 5 minute OHLC (Open, High, Low, and Close) bar chart, and the daily pivot points. The chart timeframe can be adjusted to suit different markets. The default trading time is any time that the market is open, but for best results the market should be active.
Day Trading Based on Camarilla
Discovered while day trading in 1989 by Nick Stott, a successful bond trader in the financial markets, the SureFireThing 'Camarilla' equation uses a truism of nature to define market action - namely that most time series have a tendency to revert to the mean. In other words, when markets have a wide spread between the high and low the day before, they tend to reverse and retreat back towards the previous day's close. The SureFireThing Camarilla Equation uses some complicated mathematics to pluck 8 levels out of thin air, using nothing more than yesterday's open, high, low and close. These levels are, frankly, astounding in their accuracy as regards day trading, even to seasoned traders, who know all about support and resistance, pivot points and so on.
The SFT Camarilla Equation produces 8 levels from yesterday's open, high, low and close. These levels are split into two groups, numbered 1 to 4. The pattern formed by the 8 levels is broadly symmetrical, and the most important levels are the 'L3', 'L4' and 'H3', 'H4' levels. While day trading, traders look for the market to reverse if it hits an 'L3' or 'H3' level. They would then open a position AGAINST the trend, using a stop loss somewhere before the associated 'L4' or 'H4' level. The SFT theory suggests setting stoplosses that appear to you the trader to be prudent, and to not even open the trade until it has penetrated the level in the 'right' direction, i.e. demonstrated that it has found resistance (or support). In the case of the higher H3 level, this would mean that price had already reversed and pushed back down thru the level, heading south.
The second way to try day trading with the Camarilla Equation is to regard the 'H4' and 'L4' levels as 'breakout' levels - in other words to go WITH the trend if prices push thru either the H4 or L4 level. This essentially covers all the bases - Day Trading within the H3 and L3 levels enables you to capture all the wrinkles that intraday market movement throws up, and the H4 - L4 breakout plays allow the less experienced trader to capitalise on relatively low risk sharp powerful movements.
Camarilla Pivot Points
The formula used in the calculation of Camarilla Pivot Points are:
R4 = C + RANGE * 1.1/2
R3 = C + RANGE * 1.1/4
R2 = C + RANGE * 1.1/6
R1 = C + RANGE * 1.1/12
PP = (HIGH + LOW + CLOSE) / 3
S1 = C - RANGE * 1.1/12
S2 = C - RANGE * 1.1/6
S3 = C - RANGE * 1.1/4
S4 = C - RANGE * 1.1/2
Where R1 through R4 are Resistance levels 1 to 4, PP is the Pivot Point, S1 through S4 are support levels 1 to 4, RANGE is the High minus the Low for the given time frame (usually daily).
The SFT Camarilla Equation produces 8 levels from yesterday's open, high, low and close. These levels are split into two groups, numbered 1 to 4. The pattern formed by the 8 levels is broadly symmetrical, and the most important levels are the 'L3', 'L4' and 'H3', 'H4' levels. While day trading, traders look for the market to reverse if it hits an 'L3' or 'H3' level. They would then open a position AGAINST the trend, using a stop loss somewhere before the associated 'L4' or 'H4' level. The SFT theory suggests setting stoplosses that appear to you the trader to be prudent, and to not even open the trade until it has penetrated the level in the 'right' direction, i.e. demonstrated that it has found resistance (or support). In the case of the higher H3 level, this would mean that price had already reversed and pushed back down thru the level, heading south.
The second way to try day trading with the Camarilla Equation is to regard the 'H4' and 'L4' levels as 'breakout' levels - in other words to go WITH the trend if prices push thru either the H4 or L4 level. This essentially covers all the bases - Day Trading within the H3 and L3 levels enables you to capture all the wrinkles that intraday market movement throws up, and the H4 - L4 breakout plays allow the less experienced trader to capitalise on relatively low risk sharp powerful movements.
Camarilla Pivot Points
The formula used in the calculation of Camarilla Pivot Points are:
R4 = C + RANGE * 1.1/2
R3 = C + RANGE * 1.1/4
R2 = C + RANGE * 1.1/6
R1 = C + RANGE * 1.1/12
PP = (HIGH + LOW + CLOSE) / 3
S1 = C - RANGE * 1.1/12
S2 = C - RANGE * 1.1/6
S3 = C - RANGE * 1.1/4
S4 = C - RANGE * 1.1/2
Where R1 through R4 are Resistance levels 1 to 4, PP is the Pivot Point, S1 through S4 are support levels 1 to 4, RANGE is the High minus the Low for the given time frame (usually daily).
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