I have been starting to develop a strategy recently, and have noticed that on 15 minute charts, the daily pivot points ((H+L+C)/3) are quite significant support/resistances. But I am looking some advice for a trigger that would help to narrow down the trades to a better, more reliable ratio when they pass through these Pivot/S1/S2/S3/R1/R2/R3 points.
For example at the minute I’m following the trend in the 1 hour charts, while keeping an eye on major support/resistances on the longer TF (4H/daily). I then follow the trend from the 1H chart and use the 15minute chart to trade in the direction of the trend only when it approaches the pivot points.
But like I say I am not trading yet, just working on a strategy, and I was wondering if anybody else uses daily pivot points in their strategy and how they use them? What other indicators do you find works well with them? Do you use them as the trigger or do you use them to define entry/exit points? And if so do you have any suggestions for what I could use as the trigger for trading?
Hey Paul. Wanted to offer you a couple of different points on some of what you had to say. If I don’t offer information on something; I’m not comfortable enough in my answer to provide a good answer for you.
The use of pivots in a strategy is approached differently depending on the strat. Some people use them as an indicator at a point of S/R while others wait for confirmation that price is indeed moving in the other direction. You should also be aware that as you drop below the 4 hr increment charts that candle formations have less strength behind them because they are derived from a smaller amount of information. So if you see a pin bar on a daily chart that has a lot more strength and is more likely to indicate a reversal than a pin bar on a 15 minute.
Most strategies I’ve seen do not suggest using the actual end of pivots for targets. The most common piece of advice I’ve seen is to be out about 75% of the way through the potential movement towards the next major point of S/R- which takes into account that volatility is likely to die down as it approaches that level. Then you’re out before it can become an issue.
But I would go further and make a different suggestion. Drop down to the Free Trading Systems sub-forum and look at already developed systems that people are using. I wasted a good six months trying to develop my own system with the idea that it was a better approach. The reality is that there are so many indicators and ways to trade that you need an in-depth knowledge of every indicator you try to ensure it actually works well with the rest of your strategy. You’re not the first one to blaze this path so there’s no real point in going in blindly.
You can make use of an already developed strategy that people are already using. You have the benefit of that strategy already being tested thoroughly by several other people and you have people who are experienced in trading that way to bounce things off of.
It sounds like you’re trying to trade a form of Price Action; which is what I and several others here trade. There are several threads on it. I would recommend giving them a look before wasting any more time on trying to develop your own route.
I’ve started a group where traders with some experience can get together and discuss their trading methods. You may find someone that has been trading daily pivots… Send me your skype name if you would like to join our meeting this Friday. http://forums.babypips.com/newbie-island/53096-chronic-dynamics.html#post477547
pivots for FX are really helpful —> on intraday provide nice support / resistance areas
but in developing startegy remember to make it COMPLETE —> entries are only small part of strategy.
it should have / MM / exits / targets /position sizing / when not taking trades etc