Daily GBP Povit Points (S/R levels)

GPB Daily FloorPivots (midnight EST.)

Floor Traders Formula:

PP = (H+L+C) / 3

R1 = 2(PP – L)

S1 = 2(PP – H)

R2 = PP + H – L

S2 = PP – H – L

R3 = PP + 2(H – L)

S3 = PP – 2(H – L)

R4 = PP + 3(H – L)

S4 = PP – 3(H – L)

You are to take these prices and horizontally plot them on the hour chart on your trading platform. When price touches any of the PPs or mid-ranges, expect a reaction on that support/resistance. If price blows through, look for it to touch the next level or retrace/test/reverse. The first 12 hrs. of the London open is the pound's most volatile time period. It moves 96 – 150 pips daily during this window. Use the pivots with any other indicator(s) you use to give you entry/exit points and stop levels. I hope this will help you prosper. If it does, freely help someone else prosper by giving away information or something you possess. Post your winning trades and tell us how you did it. Tell us about your losing trades and let us know what happened. Good luck & God bless.

R4: 1.9834

MR8: 1.9793

R3: 1.9751

MR7: 1.9710

R2: 1.9668

MR6: 1.9643

R1: 1.9618

MR5: 1.9602

PP: 1.9585

MR4: 1.9560

S1: 1.9535

MR3: 1.9519

S2: 1.9502

MR2: 1.9461

S3: 1.9419

MR1: 1.9378

S4: 1.9336

Next Post Midnight EST.

I’m interested to know if, and how, successful traders use daily (or weekly) pivots.

I used the attached MQ4s to plot daily pivots on several charts, to see how frequently prices reversed near the pivot, and mid-pivot, lines. I wasn’t really able to establish a pattern beyond what appeared to be mere coincidence. This made me wonder whether I was using the wrong end-of-day point (1700 EST or 2100 GMT), when perhaps I should be using either 0000 GMT or 0000 EST. Given that (as far as I know) “pivot reversals” will occur with significant frequency only if enough traders demonstrate faith in them (the “self fulfilling prophecy” concept), I’d be interested to know which end-of-day point is most widely used. Or should I be using different end-of-day points for trading the European, and American, sessions?

Incidentally, I found an alternative strategy here:
http://www.investopedia.com/articles...ntstrategy.asp

I’d be grateful if anybody could share proven strategies involving pivots, and also daily ranges, i.e. (in connection with the above post) exactly where to set entry and exit points. If I draw pivots and mid-pivots based around all of 0000 GMT, 0000 EST and 1700 EST, along with a few obvious Fibo retracements, the chart becomes a seething mass of horizontal lines with prices bouncing off just about any line...... which is really more confusing than helpful.

Attached are the best pivot calculating MT4 indicators that I’ve found. I like them because they both (i) allow one to set any arbitrary end-of-day point, and also (ii) in addition to plotting current pivots, they also plot prior days’/weeks’ pivot lines, allowing me to analyze historical price action around them.

Thanks in advance for any guidance. Meanwhile, I will try to conduct some more research of my own, and post my findings here.

David

If you're just trying to take bounces off pivots, you likely will not have great success. I can't speak for everyone, but I generally use them as indications of where to look for price action or confirmation from other indicators. Like with a simple macd or stochastic you can generally tell if price will break a pivot. If it starts crushing all the daily S/R, it's likely headed for the weekly S/R.

17:00 works for me on the daily, Although I found on some currencies different time frames work better.

Pivot points were developed by floor traders of commodity markets because the only thing they get to see is the current price, and that's it... no charts, no open book, no indicators, and the only thing they're allowed to have on the floor is a stack of cards and a pencil. They were basically agreed upon price levels to start paying attention.

Given that they were developed for live commodity traders, who only traded six hours a day, what makes you think they'll work in a 24 hour currency market that is all electronic?

I would say their effectiveness comes more into play as more people use them. I see them pushed more and more by web sites giving FX S/R pivots. Although they seem to work rather well for me the way I use them.

I've often wondered if I made a bogus indicator and some how it was passed off as the holy grail. How much of an impact would it have on price if 10 million people started using it for buy/sell signals and would it become a valid indicator? The conclusion I most often come too is "significant, yes it would". Although the amount of people or capitol might change based on perception. Then inevitable conclusion would be that it would have some affect.

I'm not saying I believe them a bogus indicator or any other for that matter. I have the perspective that people control the price and indicators of one fashion or another are how people trade. It's helpful to know what others are doing "trading", taking profits with one indication or another. While basing a system around what I know and have learned.

It's war out there, in war I feel it's best to know as much as you can about your adversary.

What I have seen pivot points, supports & resistance that are calculated from previous days high low and close do not effect the market that much. It can give some parameters of potential highs and lows. For example the gbp/usd has 81% of the time come within 10 pips of the daily R1 or S1 281 times of the last 355 trading days dating back to Jan 1 2006. It has 51 of those days hit both the R1 & S1. The R2 or S2 it has hit 141 times (40%) and the R3 or S3 59 times or 17% of the time. What I have found useful in determining pivots and S&R is previous day(s) highs and lows, previous day(s) hourly supports and resistance, trading times, news events, and Fib retracements. For instance 3am the opening of London is a good time to determine the trend for the day it can totally reverse at that time as well as 8;30 am opening of NY market. Also if you notice after 9:30 am the gbpusd as well as other currencies begins to retrace. The gbpusd retraces to the 38.2 fib 87% of the time the 50% fib 77% of the time the 61.8 fib 65% of the time after the days low and high are established. This normally happens after 9:30am. So on the most part well over 50% of the time the days high and low is established by 9:30 am or within a couple of hours of that time. Below is a quote from another trader giving one of the reasons it retraces around this time.

Goodthings:

I was told by a former bank trader that options expire each weekday at 10:00 USET. As a result, he said you can expect "strange" things to happen during the 09:30-10:30 USET period. This may explain what you have been observing.

I consider myself an active-swing trader; but most of my trades are intraday; and the 09:30-10:30 USET period has been one of my favorite "fishing holes." I sometimes catch a trade in one direction leading up to the 10:00 USET option expiration and a trade in the opposite direction after that time. The pip movements during this hour or so are not usually what most of us would call significant, but it has been a profitable time period for me so far.

Congratulations on recognizing and sharing what may be a very helpful observation to a lot of traders browsing this forum.

...\larry.bye

exelent post! thanks.

The white numbers show the fib levels from the previous days high and low and how they pertain to the next day. The green numbers are the resistance levels, red numbers are support levels and turquoise numbers are pivot points based on previous days high, low, and close. The first arrow on the left of chart is the 3am London open and the second arrow is 9:30 am. These charts are from the GbpUsd last week.

The white numbers show the fib levels from the previous days high and low and how they pertain to the next day. The green numbers are the resistance levels, red numbers are support levels and turquoise numbers are pivot points based on previous days high, low, and close. The first arrow on the left of chart is the 3am London open and the second arrow is 9:30 am. These charts are from the GbpUsd last week.

Most recent supports for gbpjpy

previous supports and resistance at current price for gbpjpy

Many thanks, everybody, for your responses.

Goodthings, you’ve gone to an amazing amount of effort. Thank you. I’ve seen Fibos drawn between prominent swing highs and lows before, but not using the day’s high and low. A very good idea – it makes a lot of sense, although I guess it comes down to how many other traders are also looking for reversals at these points.

It seems that there are some worthwhile patterns here, although easier to view in hindsight, where I find my eyes are drawn to the patterns that tend to prove theories (wishful thinking?), while conveniently overlooking evidence to the contrary.

If we look at the downtrend of 10 May (your post #8), there are pullbacks at the 100 and 161.8 Fibo levels, which also coincide (roughly) with pivots S1 and S2. Then there is the rock-bottom low just above S3. Not sure whether I’d be able to spot these in real-time, though, at the hard right edge. I would be drawing my Fibos, looking for candle patterns that could signal continuation of the downtrend between the 38.2 and 61.8 retracement areas. And/or draw a box around the congested candle formation in the pullback area, and then (re-)enter on a downward breakout.

If we look at your 8 May chart (post #9), there’s a good reversal at R1 (1.9960), and the pullback almost reaches the 38.2 level in your Fibo. This also coincides approx with a 50.0 Fibo drawn between the high (1.9962 at 3.30am GMT) and low (1.9914 at 8am GMT). The pattern there is almost like a symmetrical triangle, which can point to a continuation of the prevailing move (as it happens, correctly, downward, in this case). My pivot lines are slightly different to yours; obviously I’m using a different cut-off point (mine is 5pm New York EST).

Overall, I’m still not sure whether the correlations between momentum changes and pivot/Fibo lines are consistent enough to be statistically significant. They’re too vague for my liking.

Anyway, many, many thanks for sharing these examples. Posting annotated charts requires significant time and effort.

Best wishes
David