Pivot Trading- a new way of Trading



I have observed few traders trading pivot method think that for everyday you need a visual pivot to take a trade. This is incorrect. The method trades minor trends in the direction of visual trend. So when the visual trend gets defined, we have to trade each minor pivot in the direction of visual trade.

The chart shows that the visual trend changed to up on 24-5-2018. When we start trading on 25-5-2018, we know that the visual trend is up...so we look for place to buy based on following :

1) Minor uptrend....buy above minor pivot high...our initial stoploss is the immediate preceding minor pivot low.
2) Look for small consolidation and buy above the consolidation area.

Our first entry is above a small horrizontal consolidation......stoploss level is shown. In case one misses the first entry, we can have a second entry above a minor pivot high as shown...

The pivot method works best in trending markets. We need to have good trending moves in either direction. Most losses on this method ( like ny other trend following method ) are when traders trade this method in sideways markets. Here we are buying breakouts.....so in weak sideways markets, by the time we buy a breakout, the trend ends...so a trader has to first understand what is the market structure, is the market trending or sideways...how strong is the trend and then in sideways markets use support /resistances, VWAP bands previous days high/low, failures at important levels etc.....

How does one know the strength of the trend ? Traders can find that just looking at the chart but few pointers are as under :

1) Market making very small bars ,failing at breakouts/breakdowns.
2) Market remaining in 2 visual pivots for a long time .
3) Market making bars with long tails but small bodies.
4) Market barely going upto support/resistance levels and that too with great difficulty.
5) Market printing alternate red and green bars, both small bars....
6) ATR of the bar in your timeframe can give clues of the strength of the trend.

Traders by practice know how much move trending market gives in 5/10 or 15 min in nifty and bank nifty....so if the move is not strong, trade light in quantity and be quick to take profits......in strongly trending markets one can think of adds and holding till the end but in weak markets ( most of the times markets show weak trends these days) one has to grab the profits else it will disappear. If the market is staying in two visual pivots for a long time, then it is a danger sign that the trend is loosing strength.Trade the full quantity is a strong trend and lower qty in a sideways market....

We have seen that ERLs are not to be used in sideways markets but ERLs can be very effectively used in a trending market for catching a reversal at an early stage by pivot upgradation......we will discuss how to do it in the next weekend.

There is only one exception to what is said in the first para above. When the market closes strongly at the higher/lower end and next day it opens with a gap into the previous days afternoon range, here we need to wait till visual pivot is formed as the gap changes the supply/demand equation.

Smart_trade
 
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I have observed few traders trading pivot method think that for everyday you need a visual pivot to take a trade. This is incorrect. The method trades minor trends in the direction of visual trend. So when the visual trend gets defined, we have to trade each minor pivot in the direction of visual trade.
I was doing the same mistake....may be almost everyday... thanks sir.
 

VJAY

Well-Known Member
Sir if ERL is to draw from BPL of Bullish bar in DT y shouldn't we draw like green line in this chart, is it wrong if i draw from last MPL...
Sir if ERL is to draw from BPL of Bullish bar in DT y shouldn't we draw like green line in this chart, is it wrong if i draw from last MPL...
Draw ERL only at visual pivots not at minor pivots ...we(atleast me)use ERL of minor pivots for exits only...that too not always ...
 
Pivot upgrades crude oil chart.png


Pivot upgrades is one of the most powerful but least understood part of this method. The thread gives pivot upgrades information with charts/diagrams and we can see the actual example in the crude oil chart posted above.

When the market closes below the ERL ,the ERL shown by black horrizontal line becomes an operational ERL . When marker closes above that ERL at point B, point A gets upgraded to VPL. Then at point C the market closes below the ERL making point B as a VPH...so now we have VPL and VPH very close to each other and when the market goes above upgraded VPH B , it gives a reversal signal of earlier downtrend.

A word of caution...use upgraded pivots only for entry/exits...for trend identification in larger picture ,go with normal VPL/VPH....

The pivot upgradation gives a good entry into a potential uptrend at very near to the bottom with close stoploss....

Use this when the market has an extended move and we are expecting a reversal...not to be used when the move is just starting and in sideways moves...

Smart_trade
 
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I was thinking of doing a post on diagonal ERL but I feel it will have more confusion than utility as it is very rarely used so will skip Diagonal ERL s...
With this I have mostly covered common mistakes people do in this method...hope last 4 posts on the subject traders will find them useful .

Smart_trade
 

vivektrader

In persuit of financial independence.
View attachment 26198

Pivot upgrades is one of the most powerful but least understood part of this method. The thread gives pivot upgrades information with charts/diagrams and we can see the actual example in the crude oil chart posted above.

When the market closes below the ERL ,the ERL shown by black horrizontal line becomes an operational ERL . When marker closes above that ERL at point B, point A gets upgraded to VPL. Then at point C the market closes below the ERL making point B as a VPH...so now we have VPL and VPH very close to each other and when the market goes above upgraded VPH B , it gives a reversal signal of earlier downtrend.

A word of caution...use upgraded pivots only for entry/exits...for trend identification in larger picture ,go with normal VPL/VPH....

The pivot upgradation gives a good entry into a potential uptrend at very near to the bottom with close stoploss....

Use this when the market has an extended move and we are expecting a reversal...not to be used when the move is just starting and in sideways moves...

Smart_trade
Sir, if possible could you copy these 3-4 posts (weekend posts) of yours to initial pages of this thread where Subhadeep has explained the rules of IDF/ITF so that everything is available at one place. Your explanations are priceless and crystal clear, it would be great if these are part of definition of the system and present the entire perspective to a new reader.

Vivek
 

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