Hi, and thanks for all the input.
I actually did reply to this thread a few days back but my message seems to have dissapeared (I think there was a problem with the server at some point earlier this week).
Anyway - the main reason I wanted some clarity on pivot points was because, at the time, the EUR/USD had shot through all of its pivot levels and of course I was short at the time with no stops so I was trying to figure out if I could reasonably expect EUR/USD to return to one of the previous days pivot levels. I closed the position though and decided to stick to what I know (I don't usually trade forex pairs - not anymore anyway). Just as well I did because it's still sitting way above the levels where I decided to close my position!
Having said that I normally (almost exculsively) trade the
DAX using Bill Williams' Profitunity (Chaos) Trading System (and its various variations). For those of you not familiar with this system it relies on fractals for entry points (in one of the versions anyway). What I started to notice was that every single time a fractal entry point was reached the associated stop order would be triggered and the position would go into a 'tiny' profit situation and then the price would almost immediately retract and take out my stop (needless to say I ALWAYS use stops on the
DAX as the
DAX can take you out in a heartbeat if you're not careful). I wanted to find out why this is because it is not addressed by Bill Williams. What I found was (thanks to 'Mastering The Trade') that just about every single time the fractal was sitting at one of the key pivot levels. Coeincidence? Not likely. It just happens far too often and with too much predictability for it to be coeincidence. I mean to say - sometimes - the fractal signal is EXACTLY on the pivot point (not a few points either side but EXACTLY)!
Of course this leaves me with a huge dilemma i.e. when I theoretically should, for example, be placing fractal sell orders (according to Bill Williams) I should be placing fractal buy orders (according to John F. Carter). I'm still trying to figure out a way to catch the pivot retractment AND the fractal a bit later on but still have not come up with an answer. I mean - 'you can't have your cake and eat it' - or can you???
Maybe someone could put some input in here. Let's say that at market open the price is between yesterdays pivot level and S1. I would invariably be getting a fractal sell signal at the same point as S1. The price moves down to S1, triggers my sell stop order, and then retracts. How would you play this taking the pivot points into account? The added problem is that at some point during the day / week the price in this example will invariably move through S1 turning the Profitunity entry into a profit. If I understand John F. Carter correctly you should wait for the price to go through the pivot point and then, depending on how far past the pivot it went, you should place a limit order order to catch the retractment if any. The problem for me with this is that the price mostly does not go through the pivot but hangs around for a while and then retracts so you are never sure whether or not it is actually going to keep going in one direction or retract!
Another thing that is not addressed in the book: are pivot levels only applicable on a daily basis i.e. an instrument will trade between its daily pivots and pivot resistance and support levels BUT - on a monthly basis - should and instrument trade between its monthly pivots and pivot resistance and support levels - on a weekly basis - should an instrument trade between its weekly pivots and resistance and support levels - and so on and so forth?
Regards,
Dale.