Pivot Point Trading Technique

Hello and good day,

Here is a little something that I came across while studying my charts the other night in order to place my orders. I first looked at it using the Daily Pivot points for GJ on the M5 TF, but since converting to the daily charts, I just couldn't go back to watching the M5 chart, even though it looked good.

I have only recently placed my first trade orders, and I have no way of backtesting this system, but it is relatively easy to see how many winners and losers are on the daily chart pretty quickly.

I am going to start trading this, but keep in mind that this is untested by me except visually. Maybe it has even been done before. Regardless if anyone has any ideas as to how to make this a better system, please feel free to pipe up as I am still learning how to make this better as it is very easy to implement.

Pairs and Pivots

AU = Weekly Pivots
EU = Weekly Pivots
GU = Weekly Pivots
UCAD = Monthly Pivots
UCHF = Weekly Pivots
UJ = Monthly Pivots
GJ = Weekly Pivots
ECHF = Monthly Pivots
EGBP = Monthly Pivots
NU = Weekly Pivots
EJ = Weekly Pivots
GCHF = Weekly Pivots
EA = Weekly Pivots
ECAD = Weekly Pivots (this could easily go to monthly, but for now I'll start it here)
ACAD = Weekly Pivots
AJ = Weekly Pivots
NJ = Weekly Pivots
AN = Monthly Pivots


I will add additional pairs later. Also, these pivots might need to be changed for example if the Yen started giving us more movement, we may need to switch to the Weekly Pivots of vice versa for some of the other pairs if there movement decreased. I don't know if I will trade all these pairs. I am hoping to eventually, but I will at least start out with the top 6 pairs above

Chart

Daily Chart

Rules

First you will want to put the most recent Weekly or Monthly Pivots on your chart for the current week or month.

Then you will want to make permanent lines where the pivot lines are as we will not want to change these lines until the price closes above R3 or below S3. (It may actually be better to change these pivots every week or month as normally would happen, but I can only see on the screen using the same pivots for the whole screen. We will have to keep an eye on this)

Once the lines are permanent you can remove the pivot indicator. Once again for the time being we will only replace these pivot lines with new ones if the price closes above R3 or below S3.

Thought Process

The thought process behind this is that if price action travels halfway between any two pivot points either up or down that it will go the rest of the way to the next pivot point.

Entry Positions

Under most circumstances you will only need to monitor your trades once per day. You will miss a trade here or there if price moves very fast, but for the most part you will be able adjust your orders without missing too much.

You should now be able to place 5 or 6 pending orders based opon wherever the current price falls in relation to the current pivots you just put on your chart.

You will place as many buy stop orders as you can from the halfway point between two pivot lines with a take profit at the next higher pivot line and a stop loss at the next lower pivot line. There will be no buy orders placed above R3. Remember that if the price closes above R3 you should repaint your pivot lines and place all new orders based on the new lines. Make sure that you also input your take profit and stop losses at the time of the order.

You will then place as many sell stop orders as you can from the halfway point between two pivot lines with a take profit at the next lower pivot line and a stop loss at the next upper pivot line. The will be no sell orders below S3. Remember that if the price closes below S3 you should repaint your pivot lines and place all new orders based on the new lines.

As you can see this gives us a 1:1 ratio which means that we will need to have more wining trades then losing trades for us to make a profit. To me it is pretty evident that this happens.

You will need to monitor your trades each evening in order to add an additional buy or sell stop that you were unable to put in before if the price moved enough for you to be able to.

You should also always wait for the the price to touch or come within a few pips of touching a pivot line before placing any new orders in the other direction.

Attached is a spread sheet that will allow you to place the value of each pivot and then it will automatically calculate your T/P and S/L settings. These are based upon my spread features and can easily be changed if yours are different. Make sure you follow the chart and put the S2 value in the S2 spot on the chart and so forth.

Also attached is a Pivot Point Indicator. I think it has a minor hang-up so if anyone else has a version that doesn't contain a glitch, we'd love to see it.

I hope that you enjoy testing this system with me, as I am really excited to add it to my portfolio.

Enjoy and if you have any questions or comments, I will be around.

Damon

I've been looking into something very similar lately using the daily pivot, thinking about a 1:1.5 RR. I haven't done much analysis yet but it looks interesting.

I also looked at the daily pivot, but in most cases I found that they were too close together except for a few pairs. I think you will find that the Weekly and in some cases the Monthly pivot points will give you much better results with fewer stop outs.

I have thought about changing the ratio as well, but it would mean that I would need to monitor any open orders so that lets say when a pivot line is hit, the order moves to B/E + 10 and then can be allowed to continue until the next trade is executed...or something like that.

If this proves profitable I would consider having an EA made as this would be a good system to do that with and then it would be easy to implement the 1:1.5 ratio
Cheers,

Damon

I found that I forgot to figure in the spread for the short t/ and s/l figures on my first version.

I have now uploaded a new version on the first thread with spreads figured into these areas.

Cheers,

Damon

I woke up this morning to find that 3 trades were placed while I slept.

G/U short for a profit
E/U short for a profit
A/U short for a loss.
UCHF long for a profit
EU short and still open

So far so good.

Damon

I wonder if it would be good to open up two orders. One with an original T/P at the next pivot point and the second one would go to B/E with a trailing stop and just letting it go until it hits the next profit target or gets stopped out.

I will look into this.

Cheers,

Damon

I know that this isn't the right thread, but I don't have any other place to put this right now.

Has anyone seen how long AUD/NZD has been tight. I think it is getting ready of a very big 500 pip or more break out.

I have just placed two long orders above the closed bullish reversal candlestick, so we will see what happens.

Cheers,

Damon

I have put a lot of thought into this and feel that it will be just best to leave things at a 1:1 ratio to keep things simple.

If this turns out profitable over time then maybe it can be asjusted but as I trade many systems at one time, this will work just fine for me.

I have also edited the above post which shows my results for the week.

I will try to post my trading results with this thread at least once per week.

Cheers all,

Damon

I started this systme on Thursday Feb. 7th and here are the results from then until the rest of the week.

G/U - 1/0 - Win Ratio 100%
E/U - 1/1 - Win Ratio 0%
A/U - 0/1 - Win Ratio (100%)
UCHF - 1/0 - Win Ratio 100 %

So far we have the winning ratio that we are looking for. 60% win ratio over all.

See ya soon,

Damon

Are you ready for a fantastic week of pivot point trading? I sure am. I have my 6 majors with orders placed and have also placed orders for GJ and ECHF.

Let's hope for a good week.

hey, nice thread and nice idea.

Can you please post a chart explaining one of your recent trades using PP?

It would be easier for me and others to understand it. Thanx

Yes... I will be sure to do so, but might not have any time until the weekend.

Thanks for the suggestion.

I liked this idea enough that I took a quick look at the charts. It looks proimsing. I will be waiting for more from your results. Thanks for sharing Tom

No problem........enjoy

Well.....It has been a very relaxing weekend away from my computer. I have not yet had a chance to upload any charts, but it is still on my list. I wanted to take a minute to give the results to date on trading this method.

I started this system on Thursday Feb. 7th and here are the results through 02/15/08.

G/U - 1/3 - WR 33.3%
E/U - 2/3 - WR 66.7%
A/U - 0/2 - WR 0%
U/CHF - 2/2 - WR 100%
E/CHF - 0/1 - WR 0%
G/J - 1/1 - WR 100%
E/G - 0/1 - WR 0%
G/CHF - 1/1 - WR 100%
E/A - 0/1 - WR 0%
E/J - 0/1 - WR 0%
U/CAD - 0/1 WR 0%

Totals 7/17 - WR 41.2%

So far we have less then desireable results. but this has really only been the first week and the market is very tight. I will continue to post my results here on a weekly basis and will try to upload some charts when I get a chance, and although our overall rate is important it is also important to illiminate any pairs where this method just doesn't work.

When you say three trades were placed while you slept, does that mean you have an EA for this strategy?

No et.....I place all the orders that cam be placed both long and short at the end of each day. Of course each day you will only have to compensate for any trades that were triggered, otherwise all the others placed earlier are still good to go.

I started this system on Thursday Feb. 7th and here are the results through 02/22/08.

G/U - 2/6 - WR 33.3%
E/U - 2/4 - WR 50%
A/U - 1/3 - WR 33.3%
U/CHF - 3/5 - WR 60%
E/CHF - 2/4 - WR 50%
G/J - 1/5 - WR 20%
E/G - 0/1 - WR 0%
G/CHF - 1/1 - WR 100%
E/A - 1/2 - WR 50%
E/J - 0/1 - WR 0%
U/CAD - 0/2 WR 0%
N/U - 1/1 WR 100%

Winning Ratio totals combined since 02/07/07: 40%

Defineitly not quite what I was hoping for, but many pairs are still in "Range Mode". All in all, I can handle 40% while ranging if this percentage can be raised higher while trending.

See you next week

I started this system on Thursday Feb. 7th and here are the results through 02/29/08.

G/U - 4/11 - WR 36.4%
E/U - 5/8 - WR 62.5%
A/U - 2/4 - WR 50%
U/CHF - 6/9 - WR 66.7%
E/CHF - 3/7 - WR 42.9%
G/J - 4/8 - WR 50%
E/G - 1/2 - WR 50%
G/CHF - 3/3 - WR 100%
E/A - 2/3 - WR 66.7%
E/J - 2/3 - WR 66.7%
U/CAD - 1/3 WR 33.3%
N/U - 3/3 WR 100%

Winning Ratio totals combined since 02/07/07: 56.25%

This was a fantastic week in which we did over 80% of our trades were successful. Like I said, don't lose too much in a ranging market and make a killing while it is trending. If the market continues to trend next week, it should be another feast .

See you next week

if you want some longer term targets plot the yearly pivots on each currency. Since you only have to calculate these once a year I just manually calculate them and place on the chart. It is amazing how tightly the price respects these levels.