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Dear All,
I mentioned yesterday that I wanted to incorporate a condition into my
intraday testing that would take pivot points into consideration before
placing a trade. For anybody interested, I thought that I would expand on
what I am doing.
I am assuming that you are familiar with the pivot points concept. If
you're not, I strongly recommend that you familarise yourself with it.
Pivot points very often provide the levels at which price will reverse
during a trading day. Many equities, and most certainly FOREX, comply very
closely with these levels. I can only assume that it is because so many
serious traders are actively watching them.
Plot the following on your favourite equity daily chart and just eyeball
how often daily highs and lows occur around these levels:
Pivot:=(Ref(H,-1)+Ref(L,-1)+Ref(C,-1)) / 3;
R2;=Fml("Pivot") + (Fml("R1")-Fml("S1"));
R1:=Fml("Pivot") * 2 - Ref(L,-1);
S1:=Fml("Pivot") * 2 - Ref(H,-1);
S2:=Fml("Pivot") - (Fml("R1")-Fml("S1"));
(I know that this code could be written more efficiently and indeed you can
find far better Metastock code in several places. I have deliberately
written it like this for the benefit of less experienced coders because, I
think, it makes it a little easier to understand what's going on).
How can this be incorporated into a trading system?
Well, I would suggest, if you are trading a trend following system, that
you delay entering a long trade if you are approaching one of these levels
from below (until the price has safely passed through it). Opposite for
shorts. If you are trading a reversal system, and your short entry price
happens to be just underneath one of these levels (opposite for longs), it
provides very strong confirmation for you. The question is how close is too
close. That's what I'm looking to discover.
I would go so far as to suggest that any intraday strategy that ignores
pivots is seriously flawed. Now, that remark should encourage some
discussion ;-).
Regards,
Kevin
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