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RealTraders:
I would like to take this opportunity to describe the short term trading
methodology I have called pivot trading and the Near Impulse Theory and
application which makes it possible.
Pivot Trading:
Pivot Trading is based on the notion that total return can be maximized and
risk minimized by trading the short term swings between pivot highs and
lows. To accomplish this strategy successfully however, one must be able to
anticipate when to expect the pivots to occur.To do this I have developed a
market model based on my Near Impulse Theory and a forecasting application
called the Near Impulse Forecaster.
Near Impulse Theory:
The Near Impulse Theory is built on the work of others that view financial
markets as non-linear dynamic systems exhibiting chaotic characteristics. In
my theory swings between pivot points are viewed as unifractals with
combinations of unifractals composing the wave structure of a market. The
pivot points themselves are caused by one of two things:
(1) A change in sentiment of the dominant population of investors in
response to new information (Impulses) entering the market. These impulses
have limited strength and duration, degrading in time.
(2) Wave fronts of changing sentiment related to the psychological
profiles of the investment groups participating in the market. These wave
fronts expand from the initial impulse in a non-linear manner.
Although new impulses are random and not subject to forecasting, the
resultant future wave fronts are forecastable using a non-linear
mathematical algorithm applied to the strength of the near impulse. The Near
Impulse Forecaster, developed for TradeStation, applies this algorithm to
forecast potential future dates for a change in trend (sentiment). It is
these forecast dates that I post in advance on my web site and often to this
group. I have been posting the free forecasts to the web site since
September, 1998 to establish the reliability of the theory. Since then there
have been 211 forecasted pivots in various markets with 166 (78.6%)
resulting in tradable reversals of trend.
Since new impulses can enter a market at any time, we cannot be sure of the
duration of a forecasted swing or the price change of the swing. To assist
in trading these forecasted pivots, I have developed several additional
tools.
The first is the TEN's System The Ten's System was developed to filter the
Near Impulse signals to select only those with the most profit potential.
The system makes use of the Near Impulse signal in combination with the
channel position of the security and an independent buy/see signal. By
filtering and rating the trades in this manner, one can determine the extent
of a potential reversal as well as the potential market sectors that are
likely to lead the reversal. For example this analysis resulted in a recent
posting to this group for semiconductors to lead an end of year rally.
A second tool is the Daily Bias Indicator. When a trader anticipates a trade
signaled by the TEN's System, he wants the overall market to support the
direction of the trade. The Daily Bias indicator provides an indication of
the likely direction of market trading for the day as well as intraday
changes in market direction. For example If I were expecting to short a
number of stocks exhibiting TEN SELL signals, I would want the market to be
bearish on the day of the trade. The Daily Bias Indicator would give me this
indication in the first 30 to 60 minutes of market action.
A third tool is the PivotTrendDayTrader. This indicator displays dynamic
trend lines for three time frames on one intraday chart. The time frames are
(1) the local time frame of the chart (five minute for example), (2) a one
day trend and (3) a three day trend. When price penetrates these lines it
gives the trader an idea of the expected duration of he trade. Additionally
the penetration of the trend lines can provide earlier entry signals thus
minimizing the risk of being wrong on the trade.
These tools and my free quarter ahead forecast are offered on my web site,
PivotTrader.com. I also offer a mentoring service to learn the complete
Pivot Trading methodology and additional applications.
I would be glad to entertain questions regarding this trading approach
either privately or addressed to this forum.
Jim White
PivotTrader.com
Home of the Near Impulse Forecaster
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