Combining Candlesticks, Indicators, and Pivots

[Soultrader]

Technical indicators such as stochastics and the RSI can be applied to confirm pivot point setups.

When price reaches a pivot point, look for candlestick patterns such as doji's, shooting stars, harami's and engulfing patterns. This can add further confirmation to a pivot point setup.

If you trade with indicators, you can look for bullish and bearish convergence/divergence using the stochastics or RSI.

I do no trade with indicators or watch for certain candlestick patterns, however, one powerful trading setup that I have noticed recently occurs when pivots cluster up with technical price patterns. For example, in a head-n-shoulders pattern, if the neckline is in line with a pivot point this can offer a high probability trading setup.

When the breakout resistance level of an ascending triangle is in line with a pivot, this also offers a high probability trading opportunity.

If you are currently trading with indicators only and want to learn to trade with pivots, plot the pivot points and see if your indicators offer clues when price reaches the pivots. The more confirmation you get from the markets, the higher the odds are for a successful trade.

[jacobnbr1]

being a trader from technicals for 3 years, i have never explored piviots or even tried to learn how...
where would one begin to learn how to use them and what they are????

also, is there a software that plots piviot points for you? i have seen some of your charts from tradestation and see them on there. how can i plot them on say Bigcharts or another program.

chris- new member.

p.s- great site, wish i would have found this sooner.

[Soultrader]

Hi Chris,

Welcome aboard. Glad you like the site. Regarding pivot points, try doing a search in this forum. Most of my posts are based on pivots and market profile and you should find numerous charts, videos, and threads based on it.

Here is a link for the formulas:

http://www.traderslaboratory.com/for...t=pivot+points

I would assume most data vendors offer floor trader pivots as a tool in their indicators. If you are looking for a good pivot point tool for Tradestation, pm me. I know of a great commercial indicator but costs around $230. I plot the pivots by hand manually. I keep an excel spreadsheet with all my daily data and have a table setup just for pivots. All I do is plot the close, high, and low and gives me all the values.

[jacobnbr1]

I hate to be a stick in your side... But, what do all the r's 1-4, pp and s's 1-4 mean??

What is the differance in formulas? ie.. classic, woodie and camarilla?

And one more. what advantage does this give by knowing where the piviot points are v's support and resistance?

I got a tight distant friend that i chat daily with as we toss things back and forth, he seems to come up with future calls of prices stopping and turning when a certain price is breached. Although often right, he will never reveal his secret.
I always come up with a support and resistance differant than him. He always tells me he got the real support and resistance prices from price actions... I wonder if he is using this method right here? I mean piviot points. He always make himself out to be like he is the grand-puba of traders???

I asked him today and he said he was not using this method.Y-R.

thanks for all the help..
chris

[Soultrader]

Pivot points are simple support and resistance points derived mathematically. They originated from floor traders who trade based on these numbers.

The reason why floor traders use them is because they do not have the luxury to trade with monitors and look at every technical indicator in the world. They trade strictly on price and order flow.

I don't believe there is any secrets in trading unless you have developed a super system guaranteed to win. If trading discretionary, like I do, there are no secrets. What I do is nothing fancy. A trader can tell his methods to another trader; but if the trader does not know how to use it correctly he will not profit from it.

There are many methods you can use to obtain support and resistance points. Some use fibonacci levels, fibonacci clusters, moving averages, Gann analysis, etc... I am sure your friends methodology is nothing new. He is just good at applying the methodology into this analysis and trading.

Also.. make sure you never follow anyone's advice blindly. No man on this planet can predict where stock XYZ will be trading in the future. If he claims he can predict prices, he is lying. He can easily go long and reverse as soon as he senses danger. However, unless you are with him 24/7 watching his trades, there is a good chance you will hear new information about his position after the markets have moved against you.

By the way, what methods do you use to obtain support and resistance? Are they working for you?

[jacobnbr1]

I use a method from a text book of john murphy where the peaks and throughs consist of the support and resistance levels..
And then the mental support and resistance levels of even dollar or 1/4 and 1/2 dollar...

Is this an incorrect way or is it out dated?

[Soultrader]

I dont think its incorrect. John Murphy has taught me alot of things as well.

But I do think those levels should be considered as levels to look for besides your main analysis. For example, I use pivots, previous days high/low, open gaps, and market profile. However, I do still look at pyschological levels of 14700, 14800, 1900, etc... (anything ending with 00)

Try identifying more levels that other traders may be watching. If only a small percentage of traders are watching your support level, there is a chance it will not hold.

Since I do not trade stocks, it would be difficult to recommend any trading methodology for you. But you should definitely look into various techniques that are used to derive support and resistance levels. My old mentor used moving average clusters and used it very effectively trading the ETF's. Some traders use fibonacci clusters. But they are also aware of other levels apart from their main methodology like the pyschological levels of 1/2 dollar, etc...

[jacobnbr1]

Ok i have found some things out here.

So i plot an example. was a very tight day- low-1.04 high 1.12 close-1.07.

This gave me a piviot point and four r lines and 4 s lines..

what exactly is this suposed to tell me?

the example is ticker tag and is closed at 1.07

seems all the r and s lines are within a few cents of themselfs.

I guess i am not understanding time frames?

I will play with this during market conditions to see what exactly goes on

[Soultrader]

Bad idea to use pivots when you are playing with penny stocks. You are dealing with the range (high-low) of only 8 cents. Use pivots with normal stocks.

For example lets take stock XYZ:

High: $51.50
Low: $49.75
Close: $50.50

You should get the following pivots:

R3: 53.17
R2: 52.33
R1: 51.42
PP: 50.58
S1: 49.67
S2: 48.83
S3: 47.92

Now, these levels can be used as support and resistance. It is now up to you to decide which levels you want to trade at. Will you fade these levels? Or will you play a breakout of these levels?

The PP is probably the most important pivot. Followed by the R1,S2 then R3,S3 and lastly the R2,S2 pivots. If you choose to use midpoints, simply divide the pivots in half.

I also use weekly and monthly pivots as well. Just get the weekly high,low,close and the monthly high,low,close and use the same formula.

Pivot points are not the holy grail or an exact science. This is one kind of methodology that traders use. Hope this helps.

Quick Note: I use a slightly different formula from the classic and woodies. I just updated this page so please take a look:

http://www.traderslaboratory.com/for...t=pivot+points

[jacobnbr1]

Ok..

Now i know you said it was a bad idea to calculate the penny dogs but what if you calculated the weekly chart thus giving a wider spread???


Also i have plotted a stock that i own and i have come up with mid points as well, what exactly is this telling me if the price is in between the mid point and pp in the negative?? ie. what is the pp function?

thanks again for all the help...
chris