There are a lot of examples to show the “reliability” of pivot lines, nonetheless there will be pa, which doesn’t respect the lines, as I mentioned further. Out of my trading, I’ll present some charts with the intention, that one may get interested to have a deeper look at the lines.
It’s important to know, the (my) setup to enter a trade has a lot of parts, only one of them is the “where is next pivot?”. So each one, who has a valid and running strategy may have a look too, if it’s helpful or not … your decision.
So, this morning I saw a setup in AUD/USD. The pivot part of checking was valid to buy above R1. Look at the M5 chart - Price already was popping to R2 earlier in Asian session and retraced below R1. After testing and -as I thought- breaking the R1 upwards I bought. Again there was a little retracement and after 2nd going through R1 price went its way. You don’t see this on the next M15 chart, but there was a lot of hesitation at the YH-line. What’s this? Yesterday High!
My first target was the YH, 2nd the R2. I have to say, technically R2. You see, price went up above R2 and retraced there. Because this was my first trade today, I decided to cover at the R-Line, because the first pop this morning above R2 wasn’t regular pa. A bit more confidence, discipline and patience - there would be a few more PIPs. But the cover was reasoned though.
Not to stress now the pivots … and there was no more setup for me, but
after leaving R2 below, price went to 0.9312 and retraced, bounced at R2 and
went back up north.
Price went above the daily pivot 1.3257 and already tested previous session’s high 1.3282. Buying above
the pivot, the price dips again below before moving up, at 4:30 am UK news let EUR drop once more. Bouncing
again around pivot price made higher high at 1.3276. Unfortunately neither high nor first target at R1 was
reached, so I had to cover this trade.
Oh its respecting something, maybe not pivots but its there. I’d be surprised if PA breaks significantly above 1.3323’ish looking to the weekly. In any event, right or wrong, I’m looking for a confirmed rejection around the above for a short.
Probably we never won’t have a dissent, as along as you’re looking
at higher TFs and the headline here is pivots short-term, but I see
the point, not overlooking overall trend.
First trade of this week after German election yesterday - Merkels coalition with FDP now won’t be renewable, because the little partner didn’t succeed to get 5% vote to enter parliament. There may be a bit uncertainty ref. the continuation of European policies, because a probable grand coalition with the SPD give the former opposition party more opportunity to ask for more concessions.
But mainly technical analysis was reason for going into a Sell of EUR/JPY:
Sell was triggered below the daily S1 with a stop (arrow) at previous session’s low. Price dropped through S2, but didn’t reach the S3. Retracing the stop was moved a few pips above the S2, which correponded with the EUR/USD daily pivot line and EUR/USD still is the stronger leading cross and currently correlation between these two crosses is high.
Retracement stopped exactly at the daily S2 (arrow) and continued together with a new hour candle going lower towards S3. Stopping shortly before and showing a second 15 minute candle not succeeding to hit the S3 I decided to cover the trade.
Another example to confirm the importance of pivot-lines ref. to short-term trading.
Second trade - as EUR/JPY hesitated to continue trending down, there was a signal to buy USD/JPY at 4:50 am. This was a countertrend trade, because if you look at the higher timeframe 1 hour, you see USD coming down since last friday. So the size of this trade is small. Except the CT there also sit the 99.00 round number right above. Now volatlity is slowing down, maybe with New York open this will change.
Stop is set to a few pips below the S2. After trying to break the round number price came back und is going nowhere in a small channel now. Possibly the stop will close this trade. Only to show, that there never is always a profit included only if looking at pivots. But it’s enough, to have a hit and P/L ratio better than 50/50 and a reasonable money-management.
Last example in this thread - there were enough to show, that pivot lines maybe remarkable part of trade decisions:
Getting a buy signal at the R1-line, trade was opened with a stop few points below the daily pivot. First target was the next upper pivot R2. After testing the daily pivot price went up to R2. Took profit there, because it was 8:30 am and positive Unemployment (1) let go USD to the R2 - before report stop was moved to break even. 5 minute chart shows, that after the report price was ranging, until the next move up brought price to … hello, R3, despite negative Homes Sales at 10 am, also the yesterday high (2). Hit this line, retracing back in the former range until now.
I like this thread a lot; makes me miss Babypips. I think that the usage of specific tools tends to be a function of which pair one is looking at. It is clear that Fibonacci retracements and extensions are used by the larger players that move the markets, and is probably the primary tool (aside from historical S/R) of EUR/USD, GBP/USD, though I think pivots are also used to a lesser extent. However, there are other pairs that the main players use pivots (not just daily) more primariy. I think this is easier to see when one uses the higher time frames to recognize Dow/Market Maker patterns.
I bought the Ochoa book (Pivot Boss) and it has really gotten me into looking at pivots more, which I used to dismiss. Combining these perspectives with an understanding of who is trading where, and why is also very helpful.
seems, I chose the right topic to ‘reactivate’ you
Referring to your opinion which traders and how much those tools (Fibs, Pivots, S/Rs) are used, I’m not sure, if there is a preference by large players using Fibonacci. That would mean on the other side, that lesser extent by retailers would cause the price action, we see often. And I doubt that retailers have enough volume to cause this moves towards pivots and moves from one to another.
Nonetheless you see the Fibonacci numbers in nature and find the ‘golden ratio’ in many places, I think the most probable cause is the usage by a lot of market participants, because they exist - so this is called ‘self-fulfilling prophecy’.
I mostly agree with your last comment. I think that the Comemricals use a combination of tools, such as Market Maker (Dow theory), Fibs, Pivots etc. I think some tools work better on some pairs and other tools on others. I do not think there is anything magical about Fibonacci numbers, aside from the fact that thare are so widely used and therefore become self fulfilling as you say. Personally, I think that for all of the major pairs, price is determined in advance of larger moves. It’s amazing how some Fib extension percentages repeat themselves over and over.
Hey Mr. Leonard!!! Great to see you here and hoping all is well with you! I sent you a Skype contact invite.
