@SovoS - Welcome back.Hadn’t seen you here for a while.
That is very close to how I actually trade although I prefer to use S/R levels generated from the daily/4H charts instead of mathematical daily pivots. As I said above:
So I fully agree with you that there needs to be an actual method generating the entry/exit. If daily pivots work for you then that is simply great! 
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My “pivot points” are based on significant levels generated during the previous week’s trading, i.e. High/low/midpoint/close. But I use RSI and selected EMA’s and, to a certain extent, candlestick patterns to determine how and when I actually enter - and previous S/R areas for my exits.
So I don’t see a significant difference here - just a variation in determining significant levels defining action points 
Thks @tommor. Great to see you are still very present here! 
Sometimes I just need a break from the occasional bitching/bickering that breaks out now and then, even though I am not directly a party to it. Afterall, we are all on the same bus heading for the same destination. The least we can do is remain friendly and appreciative of one another, even if we disagree about the best route to take. 
PS. Mine would be a Chablis and fresh home-smoked salmon 
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No subjective price levels (Gann, Fibonacci, Pivot Points, previous Highs/lows) hold any predictive power more than random levels. If they did, there would not be a two way market.
Markets move toward stated demand until an equilibrium is found. There are instances where groups of traders need to buy or sell, demanding liquidity, disrupting the market equilibrium, causing transitory volatility which we can take advantage of.
Some examples of these price levels are groups of Stop Loss orders, exotic (touch/no touch) option defenses, vanilla option hedging, post-news market. Plot out these dynamic levels for clear lines of potential support & resistance.
Well I at least do agree with you there. I see no reason why a mathematical formula based on historical price movement should be able to define a TP or SL for future price movements.
However, I do find that watching current price action relative to the previous week (or more) does create a structured framework indicating whether a trend is continuing, pausing or even reversing. But that, in itself does not identify the likely Key Points at which a market might stall or reverse.
For exits, I do prefer the S/R price action approach - although that is far more an art form than science!
On the other hand, trading is not always about trying to get every last pip from a move. Some people are happy to get a fixed return from each move regardless of how far price might continue after they are out - they just wait for the next one! And in that scenario, it may well be that mathematically generated pivots “work” sufficiently well to provide a net gain. I haven’t done or seen any studies on that but it kind of makes sense.
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History doesn’t repeat itself, but it often rhymes. We often see these big V-shaped or A-shaped moves in the market as it takes a fraction of the buying or selling power to retrace than it did to discover. Latent demand was erased in the first move and a liquidity vacuum is left behind it, opening the door for a retrace.
I am watching this strategy run right now on EURUSD in 2012. It is profitable so far!
You are quite generous to share.
Thank you for teaching me how to properly use pivot points! They appear to be quite a similar tool to ADR. Your strategy is trading a trend continuation and mainly using pivots as good places to enter and exit the trade.
Others in this thread are saying similar. Great thread, all!
In the past, I was looking to pivots as places for price to change direction. I found nothing useful there. Again, because I did not find it does not mean it does not exist. Also, my point about verifying what people say holds true. There are many people out there trying to decieve.
Fortunately, we have many people here providing excellent advice!
I will share some stats once backtesting completes.
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much appreciated, thanks for the advice
This is using OANDA data from 2010 to recent. 17:00 Eastern is daily close.
I used my default which is to close trades before end of day and avoid rollover.
There is no accounting for spread, commission, or slippage and granularity is one hour.
So, of course, it is not perfect. And I translated “price floating above” as close price being above SMA, which is not exact. Still, these are excellent results for something shared in a post on a trading forum and quickly plugged into a backtesting framework. Test is still running.
Also, note that the test runs straight through 2019 and 2020. i.e. COVID. Markets were really strange. So, most systems takes a DD at that time. Your strategy is still profitable, despite all of this. This is great! Of course, backtest is not live so everyone reading should not expect the same exact results (obvious, but worth stating).
Again, excellent results for something shared in a post on a trading forum and quickly plugged into a backtesting framework. Thank you!
INSTRUMENT DD Profit RoMaD (negative number is good)
AUDUSD-994 3481 -3.49925
EURGBP-1170 919 -0.785531
EURJPY-2298 63605 -2.76715
EURUSD-1978 1819 -0.919652
GBPJPY-3172 4497 -1.41764
GBPUSD-2180 63 -0.0292998
NZDUSD-1154 30933 -2.67983
USDCAD-35144 -2242 0.638024
USDCHF-2185 -707 0.323983
USDJPY-983 5467 -5.56129
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I am glad you back tested my strategy and you found it profitable in all market conditions. I use it every day for live trading and is yielding good pips but I don’t close trades at the end of the day - maybe I should and it will be improved.
My orders are just set and forget type so they hit SL or TP in a few hours/weeks.
Thank you for sharing the results!
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Hi @eToto23 and @Xanaphlaxes. Just to clarify the issue, in case others are also trying this out - I assume you are both using Classic Pivot Points? There are so many different types of PP’s, all giving different values for both the Pivot and the S/R levels.
Actually, I was thinking about this all yesterday evening. And it reminds me of my earlier trading methods from way back. I have not really changed my core trading set-up at all over the years (and I mean years! )
What I like about this approach is that it combines both a directional element and a positional element. For me, the pivot level itself is entirely logical given that price is constantly moving in waves within waves . So when a mkt is trending, price is likely to retest levels in pullbacks and using the pivot as a measure of this helps avoid rushing into positions at extreme points instead of waiting for the pullbacks.
I used to use the daily pivot but migrated to the weekly basis once I started focusing more on longer term TFs. But the principle is the same.
I was particularly interested in seeing the choice of 4H TF and a 55 EMA line. I also use the 4H TF as my main entry/exit chart and the 50 EMA has always been my anchor line for as long as I can remember, both in FX and commodities/indices.
Whilst I do not use the S/R pivot levels, I do identify close PA-based S/R for my exits, both TP and SL. So, again, the core principle is the same- just a slightly different approach. However, it occurs to me that whenever a mkt is trending strongly and making new, record highs and lows, then there is no prior PA to work with, and maybe in those situations the pivot S/R levels would well be useful since they are widely looked at. Bitcoin has occasionally been an example of this situation in the past.
For me, just using PPs is a bit too mechanical, but a lot of traders nowadays want exactly that: a mechanical system that works and can even be coded into an EA, for example. Personally, the satisfaction comes more from a successful discretionary analysis rather than the actual pip result. But we are all different, and with different aims and ambitions and resources.
Thanks for the great input here
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Purely structure and price action trader here, i don’t even look at volume, my candles are all grey color. only support and resistance, structure and news events. when it starts pumping on the right place, the right time,
and with a nice power, i make 1 trade at the time. using the 5 minutes charts… everything is correlated as i see the dollar as the universal gravity. every indicator comes from the past… but the money you wanna make is in the future. love fibbonacco because of the colors… might use it for abstract art in a future.
i dont believe in indicators at all… do you think the big boys when they start moving they will have a look at Pivot points before? i dont… all i do is following smart money big boys move… if the big boy is a dog…i wanna be his tail. and yes i am profitable
HI @dark-matters12 and welcome!
Great to hear that you have evolved a method that works well and consistently for you! Just a couple of thoughts here:
True, but it is made by closing positions in the future that are opened now in the present. We are concerned with making the right decisions now, based only on past and present prices, so that we might be in a position to take those profits in the future. And there are many ways of doing that. And if that includes indicators then fine. Good that you have found a way that works for you.
I am always curious when people say this. Do we really think that all the so-called “big boys” such as banks, pension funds, investment funds, int’l companies, and so on, are all doing the same thing, at the same time, in the same markets, for the same reasons?
I don’t see any way that we could determine that on a 5-min timeframe. All we trade on such a short TF is the ebb and flow of changes in supply and demand pressure resulting from the collective activity of all market participants.
And on such a short timeframe as 5mins I would assume that any institutional trader would be just as likely to use the same techniques and indicators as any retail trader - whatever works for them. They have no better grasp of what will happen in the next 5 mins than we do. The longer timescale is a different ballpark altogether.
And we should remember that the business of the “big boys” is a lot more diverse than just speculative trading!
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Makes perfect sense! Other means are used to identify a trend and then the Pivot Points show reasonable entry and exits.
Yes, I used classic Pivot Points in the backtest.
Its worth noting that I did no optimization whatsoever. I just took the parameters from the post and used a few of my own assumptions and the results were profitable. There is clearly no curve fitting.
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Thanks for mentioning this. I’ve got lines drawn out of the previous day high/low/close, and previous week high low close.
Do you think the daily is less important than the weekly info, or it depends on the strategy?
Hi @mrhenry8th
As with any “short-term v. long-term” issue, I think the daily can be useful but is more erratic than the weekly equivalent with more fake breaks if one treats it as a pivot strategy. It also depends on the timeframe of the chart, too!
E.g. here is the daily pivot line on a 1-hour DJIA chart:
As you can see, on some days it works fine (when trending) - and on others it whipsaws horribly (when consolidating)…and, of course, offers no intrinsic indication of suitable levels for TPs or SLs. One can apply the string of pivot-based R and S levels in an attempt to define these levels but I see no logic why the range on one day should equate with a mathematical formula based on the previous day, such as " * Third Resistance (R3) = High + 2 x (PP - Low)". Again, sometimes they will work, sometimes not - but I feel it is more from coincidence than analytical determination…
I only use the pivot levels for the high, low and midpoint simply as a visual aid adding some kind of structural evidence as to what is going on and against which I evaluate my actual strategy. For this purpose, the weekly is much better since the daily can change, well, daily!!
But, as you say, it ultimately depends on one’s strategy 
Thanks for this. It’s what makes trading so hard. Sometimes the tools traders scream about so much work, and then sometimes they don’t. Makes it really hard to rely on them.
So then it’s off to the next one and again more time and testing.
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Hi, @mrhenry8th. I think this is a very common frustration amongst traders and, as you say, often leads us to jump from one approach to another, looking for a reliable answer.
However, with discretionary trading methods (i.e. excluding automated and mechanical systems) there are two additional important issues to assess before deciding that an approach “doesn’t work”:
- we all accept that trading is based on probability, and that means there will be losses in order for there to be gains. So the key issue here is our risk/money management that we apply to our trades. It is not just whether the method works, but how often it is right (win rate), how much it makes when it is right, and how much it costs when it is wrong.
This is actually the same principle as with any other business: What is our chosen product/service? how much does it cost to produce/provide it? how many will buy it? how much gross income will we gain? what is the net profit from gross income minus costs?
Risk/money management really is key to consistent trading profitability. It is often said that even a poor method can be profitable, and that may be true if we always apply strict control over our exposure risk and equity management.
As it happens, this is one of the big benefits of trading with a prop firm. Consistent risk/capital management really take on a high profile role in one’s trading with them
- With any discretionary system, all the final decisions concerning where/when to enter and exit, and our position size, are all ultimately made in our heads, and not on the charts. This is an important factor to quantify when assessing whether a trading method “works” or not. For example, with Pivot systems, how will we choose a combination from R,1,2,3,4 and S1,2,3,4? Our decision here is critical to the success rate and return from the method.
There are many factors related to the psychological side of our trading decisions. E.g. our mood/emotions such as fear, frustration, anger, over-confidence, impulse, etc. There is also our personal approach to trading before/through important data releases, holidays, big events, etc.
We need to know how much results also depend on these kinds of factors before writing off a method as a failure! Afterall, if we don’t get our risk/money management and psychological profile in order, perhaps we will find that no method is going to “work”! In fact, one could conclude that indeed it is we that have to do our work in order for the method to do its “work”!
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You are right brother because I saw that some points of fibonacchi magically work in the market.