Pivot Points Question

[Pivot Points Question]

Thanks a lot Iris. Your post contains just what I was looking for - a collection of relevant concepts and buzzwords which I need to learn inside out. You are correct - I don't have a plan, other than to make a profit - and that's why I'm paper trading. Taking a day here and there and running with one idea from market open to close has been highly educational. I'll check out each of the elements you referenced in greater detail.

 

What do you think of penny stocks? There is one stock, ATVAM, I have been observing, that vacillates regularly between 3 and 4 cents, several times w/in the course of a day. It's been doing this for a month! Seems too good to be true, too easy..?

[Pivot Points Question]

Exactly, and this is the dilemma of maxing out your winners. It may be possible with multiple lots to create a strategy that trades intraday but leaves a percentage of the trade on to build a much more long term view trade in trending price. Let this percentage run as far as you can or at least have another target area in mind.

 

You may find this provides no advantages at all, or you may find it's to difficult to implement for other reasons, but all this you'll have to find out, as you say, by yourself.

 

Interesting way your going about this, if you don't mind me asking what made you choose Pivots?

 

I chose pivots because it's an easy to understand set of formulas that can be extrapolated over any time frame. I've found that, so long as I actually stick to the plan, it has been profitable, at least in the short term that I've been paper trading. Will definitely give it a few months, but it's nice to have the chance to spend entire days doing this - getting up before the market and making some decisions, and rolling with them through the business day, to really understand what happens, and then analyzing those decisions after the bell. I'm finding it easily consumes my attention span and keeps me wired up, which is a good thing!

[Pivot Points Question]

I appreciate the responses, and it's interesting to see the various opinions.

 

1) If you are trading daily pivot points they are intended to be used for that days trading only. Now some people keep older pivot points for reference but if you wanted to position trade I would suggest using weekly or monthly pivots.

 

So, if I hang onto a stock overnight, it would be more accurate to recalculate based on a two-day range:

 

PM - THU [73.78] H: 74.52 L: 73.13

PM - FRI [74.52] H: 74.62 L: 73.65

PM - THU+FRI [74.52] H: 74.62 L: 73.13

 

based on Friday only:

R1: 74.88

PP: 74.26

S1: 73.91

 

based on Thurs + Fri:

R1: 75.05

PP: 74.09

S1: 73.56

 

Even more risky, especially going from Friday -> Monday. From looking at moving averages it appears that PM is at or near the top for the short-term. I should just sell and move on. What do you think?

 

2) You should know before entering the trade what type of trader you are. If you went into the trade with the intention of it being a day trade - then get out at the end of the day. If you went into it knowing you want to let it run, fine, but know before you enter and don't change your mind mid way thru the trade.

 

Point taken. But I don't know yet, thus the paper trading. Will learn my way through that before I start using real money.

 

When I start trading with money, necessity will dictate that my trading is inter-day as I will be starting with less than 25K. Realistically, I think I'd like to take 2-3 day positions. with a few (5/mo max) day trades.

 

This is a common dilemma you have when you are trading just based on pivot points. You also need to consider the earlier support/ resistance around and look at pivots to capture partial profits at various levels.

 

What you seem to focus is on the breakout strategy. I would recommend to take partial profits at support levels and focus on capturing the breakouts for the rest.

 

If a price goes through R1 and it looks like it's going to keep on, it seems logical to hang on as long as it remains above R1. The problem with that, of course is the price may take a quick dive below R1, and then you're back to where you were before (or worse). What I have to answer for myself is, what's the value of the additional time and uncertainty when I could simply sell immediately at R1 and be done with it?

 

 

Question 1: Which day's R1 should I use w/rt selling this position? What is the best way to approach this situation from a strategy based on pivot points?

 

Since an emotional response by traders at various pivot levels hinges on the current days pivot points (which are based on the previous days price action), it is advisable to execute orders at or near today's levels only. This assumes of course that you have some reason to believe that today's price action has an underlying impetus for reaching the level you have chosen as your target (R1 in this example). Realize that the existence of a PP does not in itself have any value with regard to price move prediction. Each day thousands of stocks trade without ever reaching any of their respective pivot points. In general it is best to trade stocks that are trending on an intra-day basis. For example, if you had executed a short trade in PM at FTP S2 and covered at or near FTP S3 on Wednesday, you would of experienced a much more predictable and favorable outcome.

 

Question 2: Should I just sell it now or wait till Monday? Will there be a potential intra-week volatility that would be better simply avoided?

 

Since you know what is happening with the market and your stock today and cannot predict what will happen tomorrow, you are advised to close all trades by the end of each trading day. There are ample opportunities everyday to earn money on an intra-day basis. Holding positions overnight exposes you to substantial and unnecessary risk.

 

Hope this helped.

 

Thank you for this. I appreciate the way you put it - totally logical to use pivots, but choose which stocks based on intra-day analysis. I will try to keep it in mind moving forward.

 

 

One obvious thing, your trading strategy its seriously lacking some important steps: Why to take a trade? What's the acceptable associated risk? What the target would be? When to exit AND why?

 

There are other things that comes to mind but answering your initial question, I would have exited the long position on Thursday with a profit and then moved on to the next trading opportunity. Another approach could be get the stop to breakeven, plus commissions, targeting new R1 if your trade was already above PP on Friday. At the very least I would moved the initial stop loss above the entry price, protecting the trading capital (first rule of trading) and then trailing the stop if you will.

 

I tend to agree: the price fluctuation and energy spent watching it like a hawk, AFTER it had already satisfied my original plan of Thursday's R1, would have been better spent on another stock. Based on your and KLTrader's comments, I think I should have taken the sell.

 

W/RT a clearly defined set of objectives: I'm just beginning, and with that in mind, am trying to really narrow down my decision process to this one technique for starters.

 

 

The gist of these responses for me:

 

Develop a plan and stick to it. Know thyself, etc. That's why I am paper trading and will continue to do so for a few months before jumping in with real money. I'm writing my own software as I go to help me test my intuitions and make decisions based on what I experience.

 

Even though I do have a plan, based on pivot points, I still catch myself making decisions outside of that plan. These poor decisions come back to haunt me pretty quickly. So that's a good thing; it's possible to learn very quickly from mistakes.

[Pivot Points Question]

Thanks a lot for your response, Mr. 10% I.Q.

 

I'm looking to eliminate the guesswork in order to make quick, accurate decisions. I could sell for a profit no problem. Am interested in knowing how "seasoned experts" would approach the situation w/in the context of pivot trading strategy.

[Pivot Points Question]

Hello traders, this is my first post on the forum. I'm getting started with some paper trading using pivot point strategy and I have a question about how to approach this situation from a purely strategic position and make a decision:

 

Thursday (yesterday) I bought PM just below the pivot, at $73.26, with the intent of selling when the stock hit R1. R1 for PM on Thursday was $75.10. However the stock didn't make it that far, and topped out at $74.50, and then closed at $73.78.

 

I decided to hang onto it overnight and see what was on tap for Friday.

 

Calculating Friday's pivots of course yielded different numbers for R1 than Thursday's. Friday's R1 is $74.49.

 

Question 1: Which day's R1 should I use w/rt selling this position? What is the best way to approach this situation from a strategy based on pivot points?

 

As it turns out, PM surpassed Friday's R1 and topped out at $74.59. It was on a roll so I held onto it, hoping it might nudge up a little closer to Thursday's R1. But it didn't get that far, and ended up closing at $74.52 - above Friday's R1 but below Thursday's R1.

 

Once again I decided to hang on, though thinking it might have been wise to sell off right at the end of the day.

 

Question 2: Should I just sell it now or wait till Monday? Will there be a potential intra-week volatility that would be better simply avoided?

 

Insight from seasoned experts would be appreciated. As I paper trade I see and learn from my mistakes on a daily basis and would like to base my future instincts on sound strategy.

 

Thanks!