Thoughts on Day/Swing Trading Part 2

[trade4joisar]

Pivots are the points where market changes its direction atleast temporarily or the market halts there before proceeding in the direction of the trend. I have posted L & T 15 min chart and marked some important pivots on it ( not marked small or minor pivots.) Pivot Highs are shown as PH in blue and Pivot Lows are shown as PH in red.

All pivots do not change the trend. For a trend change from downtrend to uptrend we need series of higher lows and higher highs.

The chart hopefully will make concept of pivots clear.

Smart_trade

Hello ST,

Thanks for quick reply.

Yes, its clear now.

Can we trade PHs & PLs with some more indicators ? like RSI/MACD OR if you have any other suggestion?

Out of given PH & PL in chart above, which trade you will suggest to take & why?

Hope you dont' mind.

 

[Smart_trade]

Hello ST,

Thanks for quick reply.

Yes, its clear now.

Can we trade PHs & PLs with some more indicators ? like RSI/MACD OR if you have any other suggestion?

Out of given PH & PL in chart above, which trade you will suggest to take & why?

Hope you dont' mind.

The pivots can be used in following ways :

1) They can be used along with indicators like RSI or MACD. So when we are in oversold area of RSI,and the market rallies breaking a pivot high, we can buy with a stoploss of immediate pivot low.

2) Pivots can be used in pure price action way. Once a trend is identified as up/down , take entries and stops on pivots.

3) Pivots can be used in multiple timeframes. So if we are in uptrend in larger timeframe of say 30 min or 60 min, then we take all long trades above pivot highs on shorter timeframe of say 5 min. All short signals we ignore as the larger timeframe trend is up.

I have posted the same L & T chart with the areas marked with red and green lines. We should look to be a buyer above green lines and sellers below red lines. To know where to draw these lines will require some knowledge of trends and trends change. But without going into finer details , trading in the direction of larger timeframe trend is the best way to trade as it stacks the odds in our favour.

Smart_trade

 

[murthyavr]

Dear ST,

The SELLs were clear. Price not able to make a new high and price breaking the
PL in between gives rise to a short/sell.

But I am not clear about the BUY setups. In both the cases marked on the chart,
price has not a made a higher PL indicating a change of trend.

They were however crossing up the PL that they have broken just before, which
become resistance levels now. So, are these trades suggested because the resistance
was broken?

Please post back whenever your time permits..

 

[mansigupta]

Anant Sir,

Kindly can you share the AFL which will mark the PH and PL for stock/index.Also kindly can you throw some light on VWAP and is there any relation between VWAP and Pivots?

 

[prabhsingh]

Anant Sir,

For calculating PH and PL, do we use (H+L+C)/3 formula for any time frame or there is any variance for that.

 

[friendforevers0007]

st da vwap on short side

 

[Smart_trade]

Anant Sir,

For calculating PH and PL, do we use (H+L+C)/3 formula for any time frame or there is any variance for that.

No these are different pivots. (H+L+C)/3 are called Camarilla Pivots. There you calculate R1,R2 and S1,S2 as resistance and support.

Smart_trade

 

[Smart_trade]

st da vwap on short side

Yes it worked well today as always....

Smart_trade

 

[augubhai]

I think these pivots are also called "fractals".

 

[friendforevers0007]

as there is a results season so i am posting about the how to trade on big events though i got this strategy from one of ma friend here it is Trading Big News Events
Trading in big news events is a long term strategy ( as opposed to day trading).
The trader needs patience to watch the trade develop. Once a trade is visible, it may often last for many weeks.

News Events can create two different trading opportunities - reversals, and, thrust.

Reversals

The news causes a sharp price move. The price movement is a short term reaction to the news. Once the euphoria / fear on the news is dissipated, prices will return to their original trend. After the news, the price movement reverses in a short while.
StreetSmarts, a book by Connors and Raschke discusses such trades in detail. Here is a summary of their suggestions.
1. We are looking for an unusual event which causes the market to move strongly.
2. Identify the closing price before the news driven move started.
3. Enter the Market at this closing price. "If the market can digest the radical event and come back to this closing price level, we want to participate in the reversing move".
4. "Risk with a stop up to the lowest level the stock reached after the sell off. For example, if a stock was trading at 20 before the event and it then sold off to 17, we will buy the stock if it comes back to 20 and risk, down to 17. "

Thrust

This is a news driven strategy which I call "The thrust". Prices react to News, then go through a reversal as discussed in Reversals above, then return back to break down below the low recorded in the first reaction. The Market is telling us that the News is really changing the environment for the stock. The effects of the news will be prolonged.

Here are the rules to trade such Thrusts:
1. Markets react to news.
2. Identify the lowest point in the reaction.
3. Wait for a correction to the intial reaction. The correction should generally be 50% of the decline from the pre news level to the lows in (2) above.
4. If prices begin their decline, go short below the lowest point in (2). Place a stop above the correction high in (3).

An example will make this easier. (1) Stock A falls from 450 to 410 on news. (2) A bounce to 435 takes the price above the 50% correction of the decline from 450 to 410. (3) We will go short below 410 with a stop above 435. Prices fall below 410, finally touching 350 in a few weeks.

Why we need rules to trade ? Because rules provide us with discipline. The rules tell us when we should be trading, and, how.