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Pivots:
A bullish pivot occurs while in a down trend and is a day when the low is higher than the prior days low and the high exceeds the prior days high.
A bearish pivot occurs while in an uptrend and is a day when the high is less than the prior days high and the low is less than the prior days low.
Please see the chart below labeled pivots for a visual aid. The green highlight bars are bullish pivots and the red highlight bars are bearish pivots. The green arrows indicate a long trade and the red arrows indicate a short trade. I used a 10 day moving average to determine trend.
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Pivots:
A bullish pivot occurs while in a down trend and is a day when the low is higher than the prior days low and the high exceeds the prior days high.
A bearish pivot occurs while in an uptrend and is a day when the high is less than the prior days high and the low is less than the prior days low.
Please see the chart below labeled pivots for a visual aid. The green highlight bars are bullish pivots and the red highlight bars are bearish pivots. The green arrows indicate a long trade and the red arrows indicate a short trade. I used a 10 day moving average to determine trend.
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Range Pivots:
A bullish range pivot occurs in a downtrend and is a day when the stock or market rallies an increment of the prior days range ABOVE today’s opening price.
A bearish range pivot occurs in a uptrend and is a day when the stock or market declines an increment of the prior days range BELOW today’s opening price.
As an example if we are trading GE and yesterdays high was 20 and yesterdays low was 19 the range is ( high – low) = $1 , today GE opens @ 20.5, I will buy GE if it rises 30% of yesterdays range above today’s open. ( yesterdays range = 1 * 30% ) + 20.5 today’s open = enter long @ $20.8.
For a visual aid the chart labeled Range pivots highlights a strategy of entering the market on a bullish range pivot or shorting the market on a bearish range pivot . The thin green line that tracks above the open shows the spot for long entry’s and the thin red line shows the spot where shorts may be entered. The green arrows indicate a long trade and the red arrows indicate a short trade. I used a 10 day moving average to determine trend.
Below you will find performance report statistics based on the pivot and range pivot concepts explained. As a comparison I also show the performance report statistics of a random entry and 7 day exit. I used a 7 day exit because that is the average trade length of the Pivot / range pivot in shorts and longs. Each backtest was run on, every one of the S&P 100 stocks since 1962 , than all of the performance reports were combined for the statistics shown below. You can see that bullish/ bearish pivots and bullish range/ bearish range pivots clearly do outperform the random market entry, in all of the most important performance measurement criteria’s listed.
Take some time and look at some charts of any stock or market, you will clearly see that every major top and every major bottom is accompanied with a pivot and or range pivot. The next time you are looking to enter or exit a trade remember these very simple rules and your trading results will almost certainly improve.
Click on image to enlarge. Pivots.
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Range Pivots:
A bullish range pivot occurs in a downtrend and is a day when the stock or market rallies an increment of the prior days range ABOVE today’s opening price.
A bearish range pivot occurs in a uptrend and is a day when the stock or market declines an increment of the prior days range BELOW today’s opening price.
As an example if we are trading GE and yesterdays high was 20 and yesterdays low was 19 the range is ( high – low) = $1 , today GE opens @ 20.5, I will buy GE if it rises 30% of yesterdays range above today’s open. ( yesterdays range = 1 * 30% ) + 20.5 today’s open = enter long @ $20.8.
For a visual aid the chart labeled Range pivots highlights a strategy of entering the market on a bullish range pivot or shorting the market on a bearish range pivot . The thin green line that tracks above the open shows the spot for long entry’s and the thin red line shows the spot where shorts may be entered. The green arrows indicate a long trade and the red arrows indicate a short trade. I used a 10 day moving average to determine trend.
Below you will find performance report statistics based on the pivot and range pivot concepts explained. As a comparison I also show the performance report statistics of a random entry and 7 day exit. I used a 7 day exit because that is the average trade length of the Pivot / range pivot in shorts and longs. Each backtest was run on, every one of the S&P 100 stocks since 1962 , than all of the performance reports were combined for the statistics shown below. You can see that bullish/ bearish pivots and bullish range/ bearish range pivots clearly do outperform the random market entry, in all of the most important performance measurement criteria’s listed.
Take some time and look at some charts of any stock or market, you will clearly see that every major top and every major bottom is accompanied with a pivot and or range pivot. The next time you are looking to enter or exit a trade remember these very simple rules and your trading results will almost certainly improve.
Click on image to enlarge. Pivots.
Subscribe to RipeTrade, details here!Click on image to enlarge. RANGE PIVOTS.
Click on image to enlarge
Want to know what to trade and when to trade? Click here
Click on image to enlarge
Want to know what to trade and when to trade? Click hereClick on image to enlarge.
5 comments:
Using the 30% bearish range pivot exit, is it possible the exit doesn't trigger at all during a down trend? E.g. if we are holding a position in GE and yesterdays high was 20 and yesterdays low was 19 the range is (high – low) = $1 , today GE opens at 20.5 but the high is at 20.9, the low is at 20.3 and close is at 20.35. The supposed exit is at 20.2, therefore the exit doesn't trigger. So for the next day, the range is (20.9 - 20.3) = 0.6, and today, the stock opened at 20.2 and low and close did not fall below 20 (the supposed exit for today), therefore the exit rule was not triggered again. There is a high possibility the position would be hold during a downtrend. Therefore I'm wondering whether it would be a better idea to hold the highest exit (20.2) rather than adjust the exit (20) everyday based on yesterday range.
Hi Tim,
Tim study some charts and you will see that the probability of a stock or market having a serious downtrend without a bearish range pivot is very low. You will probably have a hard time finding a handful of examples if you find any.
Is the entry point limited only to the day following the pivot day?
What is the exit strategy?
Thanks
Ozzy,
The entry point is on the close the day of a pivot, check out the chart. The exit was an opposite signal if the entry was a pivot then an opposite pivot was used for the exit. If an the entry was a range pivot an opposite range pivot was used as the exit. I hope this helps.
If a bullish pivot is indicated, but a bullish range pivot is not, does the lack of a range pivot trump the pivot? Or does either, when indicated trigger a trade action?
Thanks,
Rob
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