Learning to catch High Probability Breakouts
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Livermore: The Pivotal Point
In chapter five of his book, How To Trade In Stocks, famous speculator Jesse Livermore presents his theory on pivot points.
Why Look For Pivot Points
“Whenever I have had the patience to wait for the market to arrive at what I call a ‘Pivotal Point’ before I started to trade; I have always made money in my operations.” – Livermore
Livermore spends the beginning of this chapter explaining that a pivot point can mark the beginning of a long trend. Long trends are where serious speculators are known to make most of their money. Therefore, it is advantageous to any speculator to be able to identify the potential beginning and ending of a significant trend.
Livermore also points out that he never made money on a trade if he didn’t get in near the very beginning of a major move. He points out that when he is sitting on a significant profit after the beginning of a mood, he is able to hold through the short term corrections that inevitably come in the middle and end of these moves. He also notes that just as there are pivot points that give signs that a big move could be starting, those moves will also give signs that they are coming to an end. The intelligent speculator just needs to know what to look for.
The Terms Bullish & Bearish
Livermore makes it a point to inform us that he never uses the words “bullish” or “bearish” when discussing the market. He feels that those words have powerful and long term connotations attached to them that lead to clouded judgement. He prefers to us the terms “upward trend” and “downward trend” because he feels that it is easier to reverse a position when these less serious terms are attached to it.
Identifying Pivot Points
“When a speculator can determine the Pivotal Point of a stock and interpret the action at that point, he may make a commitment with the positive assurance of being right from the start.” – Livermore
The first style of pivot point Livermore identifies happens when a stock crosses a significant, round number such as 100 or 200. The theory is that once a stock passes through one of these significant points, it is more likely that it keeps going even higher. The idea is that it takes such power to get through the significant number that the stocks own momentum will continue to carry it higher.
The second style of pivot point that Livermore discusses is when a stock makes a new high. Any time a stock makes a new high, it is displaying a level of strength that it has never shown before. This strength usually propels the stock even higher after breaking into new high ground.
Livermore points out that a key factor to watch is how a stock behaves as it approaches, crosses, and then continues on from a pivot point. Any sign of weakness or struggle should be interpreted as a danger signal. Successful speculators are very defensive in this respect
In chapter five of his book, How To Trade In Stocks, famous speculator Jesse Livermore presents his theory on pivot points.
Why Look For Pivot Points
“Whenever I have had the patience to wait for the market to arrive at what I call a ‘Pivotal Point’ before I started to trade; I have always made money in my operations.” – Livermore
Livermore spends the beginning of this chapter explaining that a pivot point can mark the beginning of a long trend. Long trends are where serious speculators are known to make most of their money. Therefore, it is advantageous to any speculator to be able to identify the potential beginning and ending of a significant trend.
Livermore also points out that he never made money on a trade if he didn’t get in near the very beginning of a major move. He points out that when he is sitting on a significant profit after the beginning of a mood, he is able to hold through the short term corrections that inevitably come in the middle and end of these moves. He also notes that just as there are pivot points that give signs that a big move could be starting, those moves will also give signs that they are coming to an end. The intelligent speculator just needs to know what to look for.
The Terms Bullish & Bearish
Livermore makes it a point to inform us that he never uses the words “bullish” or “bearish” when discussing the market. He feels that those words have powerful and long term connotations attached to them that lead to clouded judgement. He prefers to us the terms “upward trend” and “downward trend” because he feels that it is easier to reverse a position when these less serious terms are attached to it.
Identifying Pivot Points
“When a speculator can determine the Pivotal Point of a stock and interpret the action at that point, he may make a commitment with the positive assurance of being right from the start.” – Livermore
The first style of pivot point Livermore identifies happens when a stock crosses a significant, round number such as 100 or 200. The theory is that once a stock passes through one of these significant points, it is more likely that it keeps going even higher. The idea is that it takes such power to get through the significant number that the stocks own momentum will continue to carry it higher.
The second style of pivot point that Livermore discusses is when a stock makes a new high. Any time a stock makes a new high, it is displaying a level of strength that it has never shown before. This strength usually propels the stock even higher after breaking into new high ground.
Livermore points out that a key factor to watch is how a stock behaves as it approaches, crosses, and then continues on from a pivot point. Any sign of weakness or struggle should be interpreted as a danger signal. Successful speculators are very defensive in this respect
Hi
Though I do not follow Bulkowski or to say any other foreign author, as they are very difficult (for me) to understand, because of my poor technical knowledge.
But want to know from you (as you seem expert on Bulkowski writings) that did he post anything on timing of completion of a pattern.
If so then by what time (not necessary exact, approximate will do) the target shown by you in the chart (though as per Bulkowski) will meet.
Thanks in advance
Though I do not follow Bulkowski or to say any other foreign author, as they are very difficult (for me) to understand, because of my poor technical knowledge.
But want to know from you (as you seem expert on Bulkowski writings) that did he post anything on timing of completion of a pattern.
If so then by what time (not necessary exact, approximate will do) the target shown by you in the chart (though as per Bulkowski) will meet.
Thanks in advance
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