Trading using two pivots

Chapter 1

Introduction

In this topic we'll discuss about a trading system which involves trading using only two pivot levels.

But first, let's define them.
As you already may know, the pivot levels are these support and resistance levels which, according with the variation of the price, they switch from a category to another. (example: the transition from a support level to a resistance level). As an example, I took randomly a Gold chart on the daily time frame, it's not important which time frame do you use and we can see how on three different ocassions, the precious metal tried to push over the 993.00 level, where the resistance level was situated. At this point the level was strong, but soon after that the price tried to break it once again and succeeded, and that level was used as a point of leverage for the upside movement which was nesting, the 993.00 level became then a pivot level.



Conclusion: a support which becomes resistance (or vice versa) is a pivot level.
Always, there was an important problem regarding the positioning of the price into a category which is called: range or sideways and when the price strives to move from one direction to another, into a constant limited range.
Trading using two pivot levels is coming to solve this dilemma.

Construction

For starters, you need to determine (on any given chart) the two most important pivot levels. We need to build only two horizontal lines for that. The ultimate goal of this is to have a system which define for you in a very precise manner if there is a trend or not or future warnings regarding the possible shifting in trend or an entry into a possible messy correction phase or sideways market.
In the example below, on the AUD/CHF pair, we established two pivotal values on the 0.9850 level and respectively - 0.9473 level.



To do that you don't have to zoom out too much into the past price action, I did it in the upper example only to highlight and make you understand properly, these areas and you need to do that when the price action is lacking it's clarity or there exists relevant support and resistance areas, for marking.But these situations are rare.

Now, after drawing them, we have three important zones or biases, as follows:


1. Upside bias

If the price is above the pivot which has the highest value - the bias is up (green colored zone).



2. Neutral bias

If the price is situated between the two pivot levels - the bias is neutral. (grey colored zone)



3. Downside bias

If the price is situated below the lowest pivot level - the bias is down. (orange colored zone)



These areas are drawn manually with this indicator, with green (for up bias), gray (for neutral bias) and orange (down bias). When using it, needs to be installed on each time frame do you like, not for all of them simultaneously, because the positioning of the pivot levels will change for every time frame.



Characteristics

Both upside and downside bias implies potential ferm or even aggressive moves which could lead to fresh historical lows, when positioning in the downside bias or to go to fresh highs, when the price is positioning in the downside bias.
When the price breaks any pivot level and enters in the neutral bias, this action should be watched with caution, because the positioning in this particular case may entail with losses, because the price could correct very little, or to be a fake break or even the nature of the correction to be irregular and chaotic.
Just watch below the reaction of the EUR/AUD currency pair, when broke the 1.4848 pivot level. Up and downs like a spinner.



Among the advantages, trading only the upside and downside biases, are:

- there is a higher degree of certanty, regarding hitting the targets
- there is a little roomier of stop-losses, and the price can breath and consolidate before bursting into an impulsive trend move
- there are better risk ratio in the upside and downside bias cases than in the neutral

Upside bias on EUR/AUD



This movement occurs over the aftermath of the global central banks cut interest rates simultaneously, the news ise here.

Downside bias on Nasdaq


And this move has happened in the weeks after the Lehman Brothers collapse, the news are here.

Chapter 2 has been created and can be found in the post now, on post no.66.

May I respectfully suggest that the indi might be better if it was multi time frame. Then for example you could trade off an M15 chart with indi set for H1 or H4 or whatever you like. You could even add the indi more than once in different colours for different time frames.

I agree with you. The indicator was not my creation, a member from another forum made it. With or without it it's only for coloring the areas, that's all.
Anyway if here is anybody who can improve this indicator I would be grateful.

Thanks

this is the new one, your trading idea is great. How long have you been trade with this system ? and what is the result ?

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set target

The main issue with this approach is not the profitability but the fact that you cannot trade 24/7. Only an expert adviser could solve this issue.
I have trade it with some mild results. I was frustrated because sometimes I have missed some great trade opportunities because I wasn't home or I was sleeping on those late hours.

EUR/USD, short term analysis

After the breach of the 1.2985 pivot, the price couldn't not sustain itself in the down bias and crossed the pivot entering in the neutral bias. We only have two options if the price:

1. Remains in the neutral area and could fall in an erratic manner, not breaking the 1.2985 pivot level. And then could sharply go to higher intra-day levels, to even 1.3015 (38.2 Fibonacci level of the downward move 1.32422-1.29332). A big clue that this scenario could develop is the presence of the big bullish candle which broke the pivot. The risk, as I've said earlier in this opening of this topic, should remain very low if this scenario will develop and I recommend even using tight stops and trailing stop if you are choosing the upside potential.





2. If the price rejects sharply from this level, and enters in the down bias, the target should be much wider than the previous scenario, to 1.27446 level. Caution should be advise in this scenario and should enter short only after the break of the temporary low of 1.29332.





Have a nice day!

EUR/USD, short term analysis - conclusion

Looks like the EUR/USD pair is going to develop the bearish scenario, the one containing the violent break of the pivot level of 1.2985 and marching firmly to the low of 1.29332 (for confirmation) and later on for the 1.27446 level as target. The stops should be near today's highs (1.30287).



Good luck!

EUR/USD, short term analysis

The pair broke the 1.29332 temporary low, now is on the 1.28971 and made approximate 35 pips if you placed a sell stop under the 1.29332 as I have recommend it yesterday morning.
Now, given the current market conditions, we have two options for the price to develop for the rest of the day as follows:

1. Marching towards the low of 1.27446 (approximate 162 pips) as long as the price is hold in the down bias, under the pivot of 1.2985 level.





2. Reversing sharply and breaking the 1.2985 pivot and sending the pair back into the neutral bias, and possible going for the 1.30289 level, which is the 38.2 Fibonacci level retrace from the down movement 1.32422-1.28971. But for this scenario I do not recommend entering with normal amount of risk.





Don't forget to attach the indicator , otherwise the templates will not function properly.

Good luck!

EUR/GBP, short term analysis

A tricky question, a tricky answer

From the 0.85159 level, this week high, the price has fallen nearly 100 pips, until it reached 0.84201 in a firmly movement. The bias is still neutral because it is situated between the two pivot lines (0.8584 and 0.8400).

From this standpoint we have two misleading scenarios:

1. Choppy upward movement

As long as the price stays in the neutral bias the choppy upward movement could continue in the same shallow, flatly manner.
If you want to capitalize this opportunity, it is recommended that the price pass 0.85159 temporary high, for targeting 0.85567 which represents 38.2 Fibonacci level from the entire down movement 0.88143-0.83974.
Caution is advice because of the possible danger that could contain this neutral bias area and risk control would be recommended (10x times lesser risk than in normal situations).








2. Continuation of the hesitating time consuming down movement

Only it breaks the 0.8400 pivot level you should go short. But, considering the structure of the downward from 0.88143 movement, we would only target 0.83634 which is the 61.8 Fibonacci level of 0.80847-0.88143.








Don't forget to attach the , otherwise the templates will not work properly.

Good luck!

Another good reference by using 2 pivot point to determine long and short area.

I am currently using weekly and daily high and low for this case. Then I use fibonacci level to scale in my position. Good result after backtesting, and DD is less than 30%.

I want to do more research on the area for where to long and short. And I found this 2 pivot point is interesting, may I know what is the calculation of this PP?

By PP do you mean potential profit or profit proportion, or something else?

Pivot point.
Ths.

As I've tried to hint in the beginning of the topic the pivot points are visually drawn. There are no secret formula and so on.

Like in the following example:



Two simple lines which connect the most important zones, visually you can very easily see them, with zero effort.

oh i see. Then this case is similar to support and resistance line. But is this possible to code into EA? I don't think so since it doesn't have formula.

EUR/GBP, short term analysis

The pair, not only that respected in a specifically fashion our neutral trend continuation, from the post no.10, but continued it's upside movement towards the 0.8584 pivot. The pivot was mildly broken and in this moment we cannot be sure if was a valid break-out. Anyway, the price came down below the pivot, in the neutral area. From this standpoint we'll have two important scenarios, as it follows:

1. The continuation of the initial upside movement (the one from 0.83975), passing through the 0.8584 pivot once again. To confirm the firm intention of staying in the up bias, we'll play the cautious card - only a pass over the temporary high - 0.85984 and subsequently - the 0.86365, should stir for buy trades towards the high of 0.88065 as the blue arrow suggests.





2. Continuation of the hesitating time consuming down movement

If it reverses, you could go short only if the price came back in the bearish bias, with the passing through the 0.8400 pivot. Given the apparent corrective down movement, I mean the time consuming downside movement from the 0.88065 high, if it will break the pivot we'll only target 0.83607 level, which is the 61.8 Fibonacci retreat level of entire 0.80847-0.88143 movement.





Don't forget to attach the otherwise the templates will not work properly.

Good luck!

The pair preferred the scenario which involves the price decrease, so far. Not deceiving enough? Take a look! No wonder that the pair drove the traders crazy, at least the ones who doesn't apply Elliot wave theory. The scenario remains valid.



Good luck!

Forex: AUD/USD, short term outlook

From the yesterday's low on 0.90855 level the price rose strongly, making a new temporary high, on the 0.92914. As the price is still situated under the 0.9324 pivot level, the bias remains down. Given the current currency pair technical conditions the main scenarios for the development of the future price are, as it follows:

1. Heading down, as long as the 0.9324 hold, targeting the temporary low of 0.89979 as the blue down arrows suggests



2. Heading up, only if the 0.9324 level is broken, targeting the 0.94777 level, which is the 38.2 Fibonacci retrace of the down movement 1.0254-0.89979. For safety, wait for the break of the 0.93443 peak, a pending stop above would be advised, as the violet arrow suggests.

Forex: AUD/USD, short term outlook

Looks like the pair isn't not heading down, at least not yet. The pair attemped two times to break the 0.9324 pivot level and failed so far. Given the current currency pair technical conditions the main scenarios for the development of the future price are, as it follows:

1. Heading up, only if the 0.9324 level is broken, targeting the 0.94777 level, which is the 38.2 Fibonacci retrace of the down movement 1.0254-0.89979. For safety, wait for the break of the 0.93443 peak, a pending stop above would be advised, as the coral arrow suggests.



2. Heading down, only if the pair is traded below 0.91283, targeting the temporary minimum value of 0.89979, as the the purple arrow suggests.

Forex: EUR/GBP, short term outlook (update)

As the 31st of May analysis sugested if the pair would break the 0.8584 pivot the pair will go up, targeting 0.88065 temporary high. At this point, we are currently only in the second leg of the upside scenario and we are expecting further rise to come towards 0.88065 level and even further more.



Any break of the 0.8584 pivot would turn this pair susceptible to choppy downside movements targeting the 0.8554 level which represents the 50.0 Fibonacci retrace of the entire up movement 0.83975-0.87104 as the green arrow suggests.

Subscribe, keep going, i like your method.