Pivot Point Trading

[Aviator33]

Well today I bit the bullet and tried a new pivot point trading technique. My initial though is that it looks pretty promising!

I decided to concentrate on one of the big retailers as the RBA was releasing their "state of the economy" at 11:30 and all indications were pointing to more bad news after last weeks rate hike.

So I decided on Woolworths (WOW) as I know it's not normally too volatile and I could cover myself if things didn't go as planned. My volatility calcs showed it should have a range of about $1.05 today (ended up being a range of $1.07 ) so decided to shoot for 1000 share lots with an initial stop of $0.05 ($50).

I felt the RBA news was sure to drive the price down and the indexes were already in negative territory so decided to go for shorts only. As the attached image of the day shows, we could have picked up some good short term longs but I really feel uneasy going against the market.

The 1 minute chart below shows up until about 14:00. By this stage the price was so far below the pivots and stuck in a tight range that I called it quits for the day.

The horizontal lines are the pivots I was shooting for (seem to be pretty darn accurate!) and the top pane is a slow stochastic I used to confirm the signals. I was also working off the 5 minute chart for further confirmation.

NOTE: This was only a paper trade as it's a new system. Will see how she goes live over the next couple of days but am pretty happy with a $900 day after commissions.

Oh, and as you can see, I still need a lot more practice on my exits!!

 

[kingie_d]

Hi Aviator,
I use a similar system but with EOD prices. I enter only longs if the price is above 30 and 60 day MAs and try not to pay more than the 10 MA. And opposite for shorts. I enter in my direction after the pivot is created and use the mid point of the pivot for initial stop loss and position sizing. I am still fussing over my exits though and am interested in how you use yours. Some trades that are established trends I will use the 30 DMA and hold for longer however with the not-so-established trends I keep trailing stops tight - just above the high or low of the previous day.
My question is how do you trail your stops? I noticed in your first short there was a fair few "pivots" in the other direction - which I would think would signal to close the trade. Do you combine the Stoch signal to confirm the close - hence being able to stay in the trend for longer? These two trades captured quite nice chunks of the movement. Please fill me in....

 

[Aviator33]

G'day Kingie

Thanks for the feedback. As this is a new system I'm still playing around with the trailing stops to get a better feel for where they should be. It's not quite the same as a traditional pivot point system and I'm still coming to grips with it but yeah, the stochs do play a major role in it.

I was initially thinking of a 50% retracement off a pivot support which is why the trades above weren't exited. Still not sure if this is going to work, have to do lots more testing. Am still tossing around a 50% scale out theory too.

But I will also use a few other signals that sometimes keep me in a trade. I particularly reference (and constantly monitor) the higher time frame of both the security, the sector and the XJO using MA's (10/20/50), stochastics and of course volume. If everything else is going my way I will tend to give the price a bit of leeway.

And of course as this was a paper trade the exits are a hell of a lot easier

Will be posting up some action from today a bit later.

 

[Aviator33]

Well wasn't exactly a brilliant day - up, down, sideways, down, up but I'm kind of getting used to that! Had some hits and some misses, ended up around even after brokerage so guess I can't complain too much.... but it sure doesn't help pay for the Chardonnay (or the car, or the rent, or the food....)

So rather than re-live the hum drum trades, thought I'd continue on with the new pivot technique. After a lot more research I think I've been interpreting some signals incorrectly. So I changed tack today and only looked for the really high probability signals (guess I should have been doing that all along hey?).

I'm still convinced this method has some merit but you not only need strong confirmation, you really need a bit of a buffer around the pivots before you commit. As usual, I also stuck rigidly to my drill down list of pre-trade setups:

1) Index (XJO,XTL)
2) Sector (XMJ,XDJ etc)
3) Security on multiple time frames with stochs and MAs
4) Cross fingers and toes and pray to the closest deity

So below is my new layout of the XJO I now use to (attempt to) confirm these pivot trades. I've now included the pivot name on the pic and only put in the actual pivots I was using as I think it was too confusing before.

Part 2 and 3 will be of some actual trades of 2 of the securities I was watching today.

 

[Aviator33]

Why the hell am I even doing this? Maybe so someone can point out what's wrong with what I'm doing? Maybe Aussie Rob will happen past my blog one day, take pitty on me and open his holy grail to me?

Anyways, BHP for your viewing pleasure

 

[Aviator33]

Hmmm, what do we have next? Ahh yes, MGR (Mirvac Group). Originally had this one on the watchlist as 1/2 year results were coming out today. Sure enough, news released to the market at 08:30 showed a 41.2% increase in operating profit and 86.4% increase in net profit after tax, apparently above expectations from early news reports.

"Surely you'd be looking for a long here?" I hear you ask (well, not that anyone's listening to me anyway )

Actually, that's exactly what I was looking for and the IAP up until 5 mins before open showed $4.60, a healthy step up from yesterdays close of $4.48. So what happens? Orders get pulled right before the bell and she gaps down 2.5%!!! What the hell is going on with this market recently?

Anyway, I joined the masses and turned bearish pretty quick and here's how the new pivot system performed.

That's it for today, I hear the Chardonnay calling.....

Note: As I've observed quite a few times since testing this system, some of the pivot levels can be eerily accurate. In this case, H3 was the exact high & close for the day.

Arrghh, just realised everything I labelled as "H" should have been "L"

 

[Sean K]

Good is bad and bad is good at the moment.

Anyone coming out with results above expectations is getting smashed....

Que bizzaro!!

Thanks for posting your trades. If you fail to get the feedback in here it may be worth creating your own thread ('Aviator's day trading' perhaps) on the regular forum where more people are watching.

Cheers,
kennas

 

[Aviator33]

Just for something different, thought I'd post up a couple on my watchlist for today.

But first the disclaimer: I have no idea what I am doing, can't offer advice, don't expect these stocks to do anything, do your own research etc etc


Should be an interesting day, solid leads from London and Wall St, dollar up, SPI up....so everything should go down! hehehehe

As always, will keep a close eye on the higher volatility stocks in the Top 20 which are currently:
QBE, BXB, SGP, RIO, WES & NAB (all showing daily volatility > 4%)

Will be watching RIO closely with results due out today & BHP as a sympathy play.

CBA results also out today. Results look under broker expectations but I'm through trying to second guess how the market will react to earnings They have also reported about $160 million unsecured exposure to Centro so that could make it interesting (though Centro have just got a 2 month reprieve from creditors...?)

Also gonna be looking for some bounce backs after yesterdays slaughter of a couple of stocks - COH, JBH and maybe even MGR but not expecting too much there.

Heaps of others reporting so they go on the secondary list if I get bored (AMP, GMG, LEI, ASX).

Half hour to open, time to get busy! Hoping for great trades to all in the melting pot today.

And the disclaimer again: I have no idea what I am doing, can't offer advice, don't expect these stocks to do anything, do your own research etc etc

 

[prawn_86]

I too am very interested in this Aviator.

I like the idea of day trading, but have very little capital, and really did suck at it when i tried.

But good luck to you and im watching with interest

 

[Aviator33]

Thanks for the feedback guys and the best wishes, sincerely appreciated. Think I'll keep it as a blog rather than moving to the forum, I guess it's kind of more for me that I'm doing it. Really makes me analyze my trades at he end of the day. But hope others get something out of it as well.

Prawn - must admit that although I've really wanted to try this for awhile I ended up doing it more out of need than want. Can't say it's going as well as I'd hoped and I sucked big time at first but I think I'm getting there and having a great time doing it (that's the main thing to me). Going to give it another couple of months, if it's still not flying will have to go back to the daily grind *sigh*

Anyway, hope I can provide some info and laughs over the coming weeks (hopefully months and years!)

Cheers
AV

 

[Aviator33]

Well what an interesting day we had. Mad morning, the 12 to 2 lunch break was soooooo boring I very nearly fell asleep, followed by the mad dash to the finish line. Whenever I feel like packing up for the day around 1:30 that last mad rush always takes me by surprise.

As mentioned this morning, all indicators pointed to a good day so it just had to do the total opposite, and sure enough it did. We also thought the CBA results were going to see some heavy selling and sure enough, massive sell off across the whole financial sector bought nearly the entire market down.

Got some minor bounces in the stocks mentioned this morning but to be honest I was too busy to get into them and the though of going long scared the beejesus out of me

All in all, pretty darn good day but I think that was just from following the trend, no real skill involved. The Pivot Points once again provided a couple of very nice profits and picked the major turning points in the XJO very nicely indeed. I'm really starting to like those babies.

I did get stopped out on a couple of stupid entries I made but luckily covered myself without too much damage.

But CBA had to be the standout and one of the easiest trades I've ever taken. Got on the CBA "short" train at central station and rode her all the way to the end of the line. Well actually, one stop before the end. Saw some massive support building in the queue from $46.10 down to $46 so jumped ship at $46.15

Actually doubled up my short position around 2:15 when I saw 4 indicators line up at the same time. It was truly a thing of beauty

Will try to post a pic shortly of that lineup but must get down the shops now so I can cook my better half some yummy Tacos for dinner. Till next time....

Cheers
AV

 

[Aviator33]

OK, thought I'd take a bit of time to share my initial thoughts on this new pivot point system I'm trialing.

This particular system, known as "The Camarilla Equation" is similar to traditional pivot points but are calculated and traded a bit differently. I can't reproduce the equation for you as there may be copyright problems and I don't want to get Joe in any trouble . However I'm sure a quick google search will turn up one of the several variations around the place. I've tried them all and have my fave....

I've also adapted the original method of trading the system from trial and error. At this stage it's not much trial so beware that these are prelim suggestions only. And of course, I'm not an adviser, can't gaurantee these will work even 1% of the time SO DON'T USE THEM!!! If you do, it's at your own risk!!!!

I also use various additional indicators and signals before I enter a trade. But on the top of the list is:
1) Trade the index
2) Trade the sector
3) Only then, check equity indicators of your choice (as well as volume) and trade in the direction of the trend of all 3. I use a combination of stochs on multiple timeframes and standard MAs

Oh and one final warning. You'd be well advised to wait for definite price confirmation of tests/reversals before entering a trade. Stops are up to the individual but I run a very tight initial stop with this system.

Below is a rough image of how I'm currently trading this system. Be warned that after more trial, this may change. But so far so good. If you can't make out the image, PM me and I'll send you the word doc.

Cheers
AV

 

[Aviator33]

"The oldest and strongest emotion of mankind is fear."
--- H.P. Lovecraft

Well that old, strong emotion finally got me today - in a big way. I guess I shouldn't really be baring my soul on here but I've come to look at this as my "dear diary" and quite a cathartic experience. And who knows, maybe someone else can learn from it? So I'm afraid, dear reader, you may have to sit through some of my disturbing rantings today, but I promise a few charts of "probable" trades from today that should have been taken.

It all started with a terrible nights sleep. It's bloody hot in Perth at the moment which doesn't help but the worst thing was the nightmare I had about having to go back to my old job. Truly terrible dream it was but I still find it amusing that I worry about having to go back to a very well paying job. Maybe it's the loss of freedom I now have, or maybe the fear of failure of day trading? Of course, friends and family don't help by constantly asking if I'm a millionaire (or broke) yet. Talk about pressure! What's that old saying about scared money in the market?

Anyway, so the lack of sleep results in me sleeping in till 7:30 (market opens at 8am in Perth). I haven't done my prep the night before due to those delicious Tacos I was cooking for the girlfriend last night. So in 1/2 hour I try to run my EOD scans, pick my watchlist, setup my pivot levels, catch up on the news and even try and take a peek at the new posts on the forum. So by market open my mind is jelly and still floating with visions of failure from my dreams.

To top it all off, I stupidly try to watch around 20 stocks off the open. Talk about overkill. Needless to say, within minutes most of them are triggering signals and I'm frozen, no freakin' idea what to do. By now I've also got the thought of "what if I give away all of that profit I made yesterday??" What other negative thoughts can I pile on to myself before 9am?

By 9:30 I realised there was no way this was happening today and closed down my feeds.

Did a lot of soul searching for the rest of the day. Not really sure if I've cracked anything in my wacked out psyche yet but I know I've got to get back on that horse. So to start with I'm at least going to try the following:

1. Major reduction in position size! Sure it's going to be harder to turn a bankable profit but it's going to be a lot easier to pull the trigger.
2. Major reduction in my watchlist. I'm going down to 2-5 stocks per day. If I don't get any signals, tough. (That's going to be a hard one to live with)
3. No trading prior to 8:30 (half hour after market open). Just far too volatile for my fragile risk averse state right now.
4. No trading between 10-12 (12-2pm market time), the dreaded market lunch hours. Looking back over my trades today I've found that ALL of my largest losses were over this period. I've read about it and been warned about it but never picked up on it till now.
5. Try to find and live by a new proverb on fear. Right now I quite like the old Japanese proverb "Fear is only as deep as the mind allows". I quite like the sound of that

To anyone reading all the way through that drivel I apologise. Just had to get it off my chest Now as promised, here's a couple of the trades we should have taken today. As mentioned earlier, there were plenty of signals to take today, far more than my capital would have allowed even on a 5% margin.

CBA should have been number one on the list after yesterday's hayride so I'll leave you with a couple of the setups from today. And just to prove it's not all roses with this system, I've highlighted a couple of false breaks that could have caused some serious grief. I've really got to study these failures hard to avoid the pitfalls.

Until next time my brain explodes...

Cheers
AV

 

[Aviator33]

Hmmmm, looking back over that PM CBA trade that break below 80 on the stoch at 15:36 with the XJO breaking recent lows looks even more convincing. Ahhhhhh, gotta love hindsight. Time for bed, night all

 

[moneymajix]

Hi

Tell friends and family that things are "unbelieveable"!

 

[Sean K]

I like your 5 points there.

I'd add in:

6. Drink more rum....

:alcohol:

 

[Aviator33]

Tell friends and family that things are "unbelieveable"!

LOL, love it! Going to a party tonight so will no doubt cop the same question again. Your quote will be on the tip of my tongue

6. Drink more rum....

Well, not rum, but my Chardonnay consumption rate has gone up in inverse proportion to the XJO - does that count?

 

[Sean K]

Chardy??

Unfortunately, I don't get the chance to drink much white wine as my wife thinks it's cat's piss.

Red wine and Rum is the only thing allowed in the cupboard.

 

[Joe Blow]

I'm not a big chardonnay fan but I recently found a nice pinot grigio that I've been ordering by the carton. I love red wines but they don't go too well with Queensland summers.

Sorry, I know this is off topic but you guys shouldn't have started talking about wines!

 

[Aviator33]

Don't get me wrong, I LLLOOOOOOVVVVEEEE red wine - just can't see the next day due to the throbbing migraine