I have been in the Futures Industry for 34+ years; with 28 of those years being a self-employed trader/speculator/consultant. I have used these Pivot Points for the past 20 years. The Pivot Points by definition are a mathematical formula which provides support and resistance levels for all markets. The formula is Fibonacci based. I have day-traders who subscribe to my service strictly for these Pivot Points. Learning the Intricacies will increase your probability of making money on a daily basis.
Please remember, these are SCALPING POINTS only. Occasionally, these points will produce a High Probability Trade. When one of these trades materializes, you do not fade it. It is better to not trade than fade the Intricacies of the Pivot Points.
The examples (to your right) are everything I know about Pivot Points and their Intricacies. The Pivot Points in all my examples are e-mini S&P Points, which are listed here.
8R 1650.25 7R 1610.25 6R 1580.00 5R 1555.75 4R 1537.25 3R 1523.50 2R 2nd Resistance 1513.50 1R 1st Resistance 1505.50 PIVOT 1500.00 1S 1st Support 1496.75 2S 2nd Support 1492.25 3S 1486.50 4S 1478.50 5S 1468.00 6S 1454.00 7S 1436.50 8R 1416.50
Based upon the previous day’s high, low and close, a daily Pivot is produced. The daily Pivot for this example is 1500.00. The Pivot should be treated like any other number.
If the market is breaking towards the Pivot, the Pivot is support. If the market is rallying up to the Pivot, the Pivot is resistance. When the market breaks or rallies through the Pivot, I like to trade with the momentum for a quick scalp.
More times than not, when the market goes through the Pivot, it will trade up to the 1R (1st Resistance at 1505.50) or trade down to 1S (1st Support at 1496.75). Out of the eight Support and eight Resistance Points, the Pivot is the highlighted number in the middle of them all.
No matter where the market opens, the Point above
is resistance and the Point below is support.
For example, the S&P market opens higher at 1510.00. The 1R at 1505.50 is now support and the 2R at 1513.50 is now resistance. Flash forward; the market now trades up 1520.00.
The 2R at 1513.50 is now support and the 3R at 1523.50 is now resistance. Let it be noted; if you are for example long the e-mini S&P’s and this market is rallying up to a Point, I would take my profits and look to buy this market again at a lower price.
The same applies if you are short and the market is trading down to a Point. I would take my profits and look to sell this market again at a higher price.
The Mid-Points are Points
When the Points begin to get wide…i.e…6.00 or more handles in the e-mini S&P’s, the Mid-Points become Points. An example of a Mid-Point would be 1R 1505.50 and 2R is 1513.50. The Mid-Point is 1509.50. 1509.50 should prove a good resistance level when the market trades up there. Another Mid-Point would be 2R is 1513.50 and 3R is 1523.50. The Mid-Point is 1518.50. Like all other Pivot Points, the Mid-Points are for scalping purposes only.
The High Probability Trade
The High Probability Trade occurs on average a couple times a month. This trade takes my Pivot Points the scalping tool and transforms it into Pivot Points a longer term, high probability tool. I look for this trade every day. You do not fade this trade. It is better not to trade than fade the High Probability Trade.
Example 1 Bullish Trade 1st Support Point (1S)
By definition, if the intraday low is the 1st Support Point (1496.75), there is a Bullish High Probability Trade in the making. Any trade back above the Pivot (1500.00) confirms this bullish trade is on.
When the market trades above the Pivot, you initiate
a bullish trade. There is now a:
75% Probability of 1505.50 the 1R
50% Probability of 1513.50 the 2R
25% Probability of 1523.50 the 3R
10% Probability of 1537.25 the 4R
I recommend taking half your profits at the 1R Point and taking the balance of the trade off at the 2R Point.
If the 1R and 2R Points are achieved within the first 2-3 hours of the trade being initiated, there is a high probability for trade up to the 3R and 4R Points later in the day.
After initiating this trade, your STOP should be placed below the 1st Support Point. After you begin to take profits your stop should be moved to above your entry level.
Example 2 Bearish Trade 1st Resistance Point (1R)
By definition, if the intraday high is the 1st Resistance Point (1505.50), there is a Bearish High Probability Trade in the making. Any trade back below the Pivot (1500.00) confirms this bearish trade is on.
When the market trades below the Pivot, you initiate
a bearish trade. There is now a:
75% Probability of 1496.75 the 1S
50% Probability of 1492.25 the 2S
25% Probability of 1486.50 the 3S
10% Probability of 1478.50 the 4S
I recommend taking half your profits at the 1S Point and taking the balance of the trade off at the 2S Point.
If the 1S and 2S Points are achieved within the first 2-3 hours of the trade being initiated, there is a high probability for trade down to the 3S and 4S Points later in the day.
After initiating this trade your STOP should be placed above the 1st Resistance Point. After you begin to take profits your stop should be moved below your entry level.
The Pivot Equilibrium Trade
This trade is all about a market which moved significantly in one direction; found support or resistance at or near a Pivot Point and then reverses course. When the market trades through the Pivot, you go with it. I tend to see this trade on days when an economic number creates a big move in the market.
For example; let’s say Retail Sales is bearish and the S&P trades down as low as 1486.50 (3S). If the market turns around and trades back above the Pivot (1500.00), there is a high probability this market will trade as high as 1523.50 (3R). Equilibrium, the low is the 3rd Support Point. With trade above the Pivot, you initiate a bullish trade. Look for the market to trade up to the 3rd Resistance Point. Obviously, the opposite also applies where as the market trades higher first and then sells off.
I recommend taking 1/2 of your profits at the 1R Point and the balance of your profits at the 2R Point. Even though there is a very good chance this market will trade as high as the 3R, you will never go broke taking a profit. After initiating this trade your STOP should be placed below the 1S Point. After you begin to take profits your stop should be moved to above your entry level.
The Same Point 2 or More Days in a Row
I save all my points for up to 2 weeks so I can refer to them if need be. If you have the same Point 2 or more days in a row, the Point becomes even stronger. I like to look for this trade when a Point works in conjunction with a trend line, or a Fibonacci retracement level. What I like about this trade, you should see almost immediate results. This is a difficult trade to determine how much profit to take. I prefer to take the quick scalp, which is sometimes a big mistake. However you trade it, never ever turn a winner into a loser.
The 2nd Pivot Point Below and 2nd Pivot Point Above the Pivot (2S and 2R)
I discovered the formula for these Pivot Points in 1994. I use the Pivot Points for every trade I make. What I found over the years;
1 If the market is breaking towards the 2nd Support Point at 1492.25 and you are short, you should take your profits and anticipate a bounce from this level.
2 If the market is rallying up to the 2nd Resistance Point at 1513.50, you should take your profits and anticipate a correction lower from this level.
3 Of all the support and resistance levels I produce, 2S and 2R prove to be great levels to take profits.
The Formula for the Pivot Points is for Sale
You can buy the spreadsheet with the formulas embedded in the cells direct from me. The price is $4,999. I will send the spreadsheet to you in an email and all you will need to do is enter your own High – Low – Close in any market you choose…stocks or commodities. For your own personal use, you can produce hourly, daily or weekly Pivot Points. The Excel spreadsheet will do the rounding for you.
If anyone needs more of an explanation of the Intricacies; jot down your question in an email and include your phone number. I will call.