Sorry for jumping in to your thread with this woolo, as it is not on topic with what you are discussing at the moment, but I thought I would add it as you are discussing statistics.

Shortly before the new year I looked at pivot points and the % of time price reached any given zone (ie. how many times did price use the zone between say R2 and R2/R3 midpoint as the high for the day, or the zone between S2 and S2/S3 midpoint as the low for the day)

This is what I found. Please keep in mind thought hat this was for the EUR/USD and I would be reluctant to use the same probabilities on any other pair without independently testing them first)

[I]Using a standard pivot indicator on the EUR/USD pair,–

Trading Days:

2011 - 260 days

2012 - 260 days

2011/2012 - 520 days

RESISTANCE

Days price hit and/or went above R2 but DID NOT reach R2/R3 mid-point:

2011 - 15.38%

2012 - 16.9%

2011/2012 - 16.15%

Days price hit and/or went higher than R2/R3 mid-point but DID NOT reach R3, (including days detailed above):

2011 - 5.77%

2012 - 6.9%

2011/2012 - 5.58%

Days price hit and/or went above R3, (including days detailed above):

2011 - 1.54%

2012 - 3.5%

2011/2012 - 2.5%

SUPPORT

Days price hit and/or went lower than S2 but DID NOT reach S2/S3 mid-point:

2011 - 16%

2012 - 18.1%

2011/2012 - 17.88%

Days price hit and/or went lower than S2/S3 midpoint but DID NOT reach S3 (including days detailed above):

2011 - 5.8%

2012 - 4.6%

2011/2012 - 5.58%

Days price hit and/or went below S3 (including days detailed above):

2011 - 3.5%

2012 - 1.54%

2011/2012 - 2.5%

So there you have the things that keep an international jet-setting playboy like myself busy when I’m not internationally jet-setting playboying.

But what do we take from such thrilling information? Well, since we are continually being reminded by those in the know, that forex trading is a business of probabilities, I suppose the probabilities are this:

On any given day, if price was to reach R2 or S2, probabilities are roughly a 6 to 1 chance in your favour that price will reverse before it reaches R2/R3 or S2/S3 mid-points for THAT day. So there is a good chance that somewhere between R2 and the next mid-point, or S2 and the next mid-point would be the High/Low for THAT day.

Incidentally, why do I keep high-lighting the word THAT? Well I’ll tell you why. The stats detailed above are only of use for THAT days trading since what is R3 or R2 or S2 or S3 or ANY pivot level for TODAY, can correspond to a totally different level tomorrow. Today’s R2 can be tomorrows Pivot point, so if you are mad enough to use any of the stats above as part of your thinking in taking a trade, REMEMBER the stats are only good for the SAME TRADING DAY you took the trade. Tomorrow you have to start again.

So, moving on, if price was to carry on through R2 or S2 and hit the mid-points between R2/R3 or S2/S3, there is roughly a 18 to 1 in your favour chance that price will reverse before it reaches R3 or S3 for THAT day. Chances are therefore very good that somewhere between the mid-points and R3 or S3 would be the high or low for THAT day.

Should price actually get to R3 or S3, there is roughly a 40 to 1 chance in your favour that price will reverse before it goes too much further. In the two years worth of data that i looked at I did not see price hit R3/R4 mid-point, or S3/S4 mid-point on one single occassion.

It did actually cross my mind as to whether it would be possible to predict what zone would be the high and low for the next day going from what zone price reached today. I fear I may be an old man before I cracked that particular little enigma code though LOL!![/I]

[B][U]I had posted this before and later these stats were updated by JohnLeonard to include this:[/U][/B]

[I]For the EUR/USD (the past 406 trading days with daily pivots calculated at the NY close)

If price opens above the pivot (but below R1):

Price will go beyond the R1 level 52.7% of the time.

Price will drop below S1 only 34.6% of the time.

If price opens below the pivot (but above S1):

Price will drop below the S1 level 57% of the time.

Price will go beyond R1 only 35.3% of the time.

How far and how often price will go beyond the R1/S1 levels was kindly provided by HoG.

*The 57% found for EUR/USD is a bit of an anomaly. For the GBP/USD, the percentages are a much more even 53.2 and 53.3, respectively. Other pairs seem to track much more closely with the GBP with only a slight variation here and there. Averaged, the EUR 57 and 52.7 percentages come to 54.8% which actually falls right in line with GBP and the rest.

So what does this tell us? Pivot points actually can be one of the few leading indicators out there (they are calculated at the close for the next trading day). By going long at the start of every day when price opens above the pivot is obviously not a trading system in and of itself but it does help overcome one very important hurdle – it beats the spread on most of the majors which is actually no small feat. Most “systems” are really nothing more than random entries and using pivots can help eliminate some of the randomness. More importantly, pivots can also keep the trader out of those trades which are stacked against him by 65% (shorting when price opens above the pivot and expecting it to reach the S1 level and vice versa). A 65% chance that price will NOT get to a certain level? Well… I find it useful.

Pivots can also act as predictive trend lines. If today’s pivot is above yesterday’s pivot and price opens above today’s pivot then the percentages are skewed even more. Instead of having to overcome that 65% obstacle the percentage increases to around 70%.

Only taking trades on the right side of the pivot, combined with some other trading method(s) such as supply and demand levels, price action, etc., should at least give novice traders a fighting chance at long term profits and possibly assist veteran traders that have just never really considered using them.

[/I]

Like I say woolo, sorry for barging in with this, thought it may be useful though.