Pivot Point Calculator 1136

I have been using the pivot point calculator for awhile, the camarilla formula, 4 decimal places for forex. I have noticed that the calculations for the midpoint between the pivot point and S1 is sometimes smaller than S1. Shouldn't the pivot point figures after the pivot point to S4 become sequencially smaller the further away from the pivot point? Sometimes they are not. For example try High 1.2859 Low 1.2456 Close 1.2825. Midpoint to S1 is 1.2751 S2 is also 1.2751?????? S1 is 1.2788, larger than 1.2751. Is this normal or the calculations wrong?
Thanks.

I see what you're saying and it makes a lot of sense. Adding the Close as an option to the Pivot Point calculation and also making it the default for the Camarilla calculator seems like the logical thing to do in this case. (Talking from the calculator's point of view.)

When it comes to trading, the question is: Which point does the price most often pivot/hinge around? Is it the previous close or is it the popular HLC/3 formula?

In order to answer this question I'm prepared to run a back test but first we need to define "pivot around." The back test, for example, will need to examine the price action on the following day. How do you determine that the previous Close or the previous Pivot Point (defined in this case as HLC/3) acted as a pivot on that day? If the price trades through it (i.e. the current day's high and low encompass the previous day's pivot) or if the price action came within X points or percent?

In other words, in real life trading terms, what measure would replicate something usable? Stating that the market trades through the pivot point 95% of the time is not, in my opinion, a usable bit of information for active day traders. What would be usable would be the percentage of time that the pivot point was traded through before the market moved the same distance in the opposite direction given a starting point of the Open price. i.e. treating the pivot point as a target like the gap fill is treated. In this case we already know the figures for targeting the close or Camarilla pivot point from all of the gap studies done. What we would need to know is the percent of time the Pivot Point was hit versus a stop of the same size. A very good or very bad result is what we are looking for here. In other words, below 30% and above 70% is usable information. If below 30% then we would fade the move off the open and go for the same distance away from the PP at the open and if above 70% we'd target the PP like a gap trade.

But I'm rambling about hypotheticals here and going off track.

So what would be a measure of a useful Pivot Point? How do traders use the Pivot Point?

quote:

---

So what would be a measure of a useful Pivot Point? How do traders use the Pivot Point?

---

Personally as a day scalper I measure the usefulness of the PP by the market reaction to the PP. Therefore I want to be using the formula that the greatest amount of other traders are using, hopefully to get the largest reaction. I use the PP levels as targets to exit a trade, for example; if my mechanical target on a trade is 20 ticks but the PP is 14 ticks away I will exit at the PP instead of trying to get the full 20. If the market hits a PP and holds I will enter a trade to fade the PP with a small stop just beyond.

I am very interested to hear how other traders use them.

mwald: You've brought up a very important point about how pivot points "work." Some traders say that pivot points work and others say they don't. In my opinion it depends on how you use them. I would say that your use of them is one of the rarer uses. I am curious to know if you've done a post analysis of your trades to see what would have happened if you'd continued to your target in the situations where you took it off earlier. There will of course be a number of times when you left points on the table and others where you saved yourself because you took a profit that would have otherwise been stopped out later.

Have you ever measured the net effect of this strategy?

quote:

---

Have you ever measured the net effect of this strategy?

---

No I have not, but I need to exit the existing trade to setup for a possible fade trade.

As far as some saying the pivots not working, take a look at yesterday and today on the ER2 (the only contract I trade). Yesterday gapped down but S1 held for a fade then rallied all day. Today after the Fed announcement ER rallied right to R1 which held for a fade good for 80 ticks back to R.5, which also held for another good fade. Yes there are plenty of failures but that's part of trading.

If you can test it; a strategy I`m interested in knowing the stats on is fading the closest PP on gap opens. If there is a gap down buy S1 or a gap up sell R1. Look at yesterday (6/27/07) on the ER2 gap for an example.

When you talk about gap opens are you talking about gaps from the previous close or gaps from the Pivot Point?

quote:

---

Originally posted by day trading

When you talk about gap opens are you talking about gaps from the previous close or gaps from the Pivot Point?

---

The close, 4:15 Eastern for the futures. I know that there is an excellent in depth gap study already posted on this site, but I wonder what the results are if you enter at a PP (R1 - S1) instead of just entering at the open.

So you place a limit order at the closest P/R/S level to trade in the direction of the gap? Other rules would be that the order was canceled if the gap filled before the order filled... And the size of the stop?