The Holy Grail - Found

It is 10:28 pm CT

Ok Norm,Usd/jpy 106.00 line Trigger point 105.95 TP =105.75 SL = 106.25 10:30 pm. Will see what happens on both of these pairs.

Just hit my target on gpb.jpy. I went to the daily and weekly charts found a few reversals at the 208.20 line. My target was 208.09. TP = 207.89 SL = 208.39 .

Interesting JohnW logic in your latest batch of speculations...
Sell stop on usd/jpy around 107.50 asks for market
to come to that level sometime in future. Why not to go long
together with market drifting towards your target price and score
the difference? That difference maybe worth around 50 pips?
With multiple time frames you can position yourself to see market from perspective of dominating either lower time frames or higher time frames.
This actually covers entire market - all frames include low time frames and high time frames. Price actually drifts thru all time frames at once so there is no special advantage of seeing it from higher or lower. You may as well see it from perspective of entire market(?)

Ok Norm, I hit 3 for 4. Tex

played the usd/cad as well. Tex

Ok system, I'll think on it. I play the method the way i see it.Thanks for your imput.

Tex

Hi John,
Thank you so much for your generosity.Could you share with us which are your time zone and your broker? Do you trade with Meta Trader or you use something else? Any way, good luck to you and yours! -- scardi

The 97% win rate could be based on having a 1000+ pip stop

Wait, why even question it?

[/sarcasm]

Stops are 30 pips. The method's been explained back at post #241 http://www.forexfactory.com/showthread.php?p=1761761

David

Thanks I understand it now.

So, does anyone trade this strategy yet?

thought john w might findd this interesting....


Good read on trading I like to trade using lines. Lines define support and resistance areas. Lines can be straight, curved, horizontal, vertical or angled. I see them as magnet areas and action/reaction areas. They attract price to it and when price gets there we get a reaction. Pause sometimes but then repelled back from where it came or allowed to pass through and on to the next magnet.

Floor Trader Pivots are calculated many ways. I use the calculation used by most traders. I don't feel there is any magic to the calculation. The effectiveness is a self fulfilling prophecy concept. The more people watching a line the more dependable the reaction.

forget where this came from

Floor Traders Pivot are a well-known technique used by floor traders (locals) and market makers in the trading pits to calculate intraday support and resistance points. This technique has been around for decades, yet is still much in use today. Before the advent of computers and sophisticated analysis techniques, floor traders used a set of calculations to determine key support and resistance points in the market. They calculated these points from the previous days open, high, low and close. The floor traders today still use these points in their intraday trading. Since the floor traders in the pits are using these points for support and resistance, it just makes good sense to keep track of these key points and be aware of them if you are doing any type of intraday trading.

For any market, there is an equilibrium point around which trading activity occurs. In the absence of large numbers of new buyers or sellers, this point serves as the pivot or focal point for the floor traders (locals) and the market makers as they adjust their bids and offers. When prices move away from the pivot, there are zones of support and resistance that can be derived from the established value area in that particular market. Penetration of these zones leads to perceived changes in valuation and usually results in the entry of new players and orders into the market.

Trading for the day will usually remain between the first support and resistance points as the floor traders make their markets. If either of these first points are penetrated, off-floor traders are attracted to the market. The range of trading has now expanded and if a second support or resistance point is broken, then even longer-term traders will be attracted into the market.

Knowledge of the levels at which different types of traders are likely to enter the market can assist in determining when a shift in valuation by the locals has occurred. This is especially useful when there is little outside influence on the market and the local floor traders dominate trading. As long as no significant market news has occurred between yesterday’s close and today’s opening, the local floor traders and market makers tend to move the market between the pivot point (P) and the first band of support (S1) and resistance (R1). If these first levels are broken, look for the market to test the level of support (S2) or resistance (R2) and then (S3) and (R3).

Combining Pivot Points with other indicators such as overbought/oversold indicators is easy and helpful. Several examples are: if price moves up to the first resistance level (R1) and one or more of your other indicators have moved into overbought territory, the confirmation provided can create a higher confidence sell signal. However, if price reaches the first resistance level (R1) and the other indicators are in a bullish mode, you could make a higher confidence buy decision with an upside target of the second resistance level (R2). It is also possible to combine the Alchemy Floor Traders Pivot Points with the Alchemy Support and Resistance Pivot Point indicator to give you additional support and resistance points.

Knowing where the floor traders levels of support and resistance are located can give you a good framework for what is going on in the pits and should help you in your intraday buy and sell decisions.

To get a feel for where the most important daily support and resistance levels are located it would be ideal to incorporate the volume behind every trade into a set of equations to calculate the daily volume-weighted average price and standard deviation levels. But because it can be difficult to obtain reliable volume data for real-time, we might be better off concentrating solely on price action.

For years floor traders and market makers have done this by computing a set of pivot point support and resistance levels between which price can be expected to fluctuate. In a way, it is not so important that you know where these support and resistance levels are, but rather, that you know the floor traders or market makers know where they are.

For example, if the floor traders are gunning for money-management stops, guess what price levels they will test? Clearly, the pivot point support and resistance levels are the prices at which many stops are placed because everyone knows where these expected trading limits are.

The central pivot point (CPP) is the equilibrium point around which trading is expected to occur. The calculation for tomorrow’s CPP is simply the average of today’s high, low and close. When prices move away from the CPP there are zones of support and resistance that define the expected value area of the market. Because these zones are known, penetration and market moves beyond these support and resistance levels bring new players into the market who give further momentum to the buying or selling pressure.

Where C[1] is yesterday’s closing price, H[1] is yesterday’s high and L[1] is yesterday’s low, the central pivot point for today and its support and resistance levels are defined as:

Central pivot point P = (H[1] + L[1] + C[1]) / 3

First resistance R1 = (2*P) - L[1]

First support S1 = (2*P) - H[1]

Second resistance R2 = P + (R1 - S1)

Second support S2 = P - (R1 - S1)

There are variants that calculate the pivot point a little differently. One method substitutes the yesterday's close with today's open, and another variation averages both yesterdays close and today's open with yesterday's open & close. I have done some rough comparisons with intra-day data, and (at least currently) the original method seems to be more accurate.

Trading for today will usually remain between the first support and resistance levels as the floor traders and market makers make their markets. The second resistance or support levels come into play only upon failure of the first resistance or support levels to contain price.

If either of the first levels is penetrated, off-floor traders are attracted to the market. In this event, the breakout levels reverse their functions and serve as test points for continued trading. In a bullish breakout, the first resistance level now becomes a support level and the second resistance level becomes a new resistance level. In a bearish breakout, the first support level now becomes the resistance level and the second support level is now the new support level.

It is clear that money-management stops placed within the range between the first support and resistance levels have a high probability of being hit. This is most likely the reason why almost all off-the-floor traders believe with absolute certainty that floor traders are gunning for their stops. To come to grips with this, some traders have used the "four-tick rule" by which a money-management stop is placed four ticks below the first support line or four ticks above the first resistance line.

However, in the cat-and-mouse game of trading, if the floor traders know where everyone calculates support and resistance it doesn’t take a giant mental leap to figure out they can pick off all the stops snuggled just outside these ranges as well.

The primary value of these support and resistance levels is that they enable you to know what the floor traders and market makers know. As technical trading tools, they should only be used in conjunction with other technical indicators to improve their efficiency.

In general, I evaluate stocks before the open to determine the recent momentum for the stock. I will consider a trade in that stock if the recent momentum of the stock, the current market momentum are going the same way. I like to catch the stock just after it moves through the pivot point.

In addition to determining where to place stops, I use the pivot/support/resistance to minimize getting into momentum trades at false tops & bottoms. I also use the support resistance levels to estimate what the potential profit will be, often keeping me out of trades with low potential.

“Why Pivot Points Work”

Pivot points are super-sized resistance and support levels. Why are Pivot Points so good at forecasting short-term price levels? Pivot Points are reflective of both

short-term volatility and trader psychology. Calculating pivots for the last session is measuring short-term volatility and direction. Pivots also

reflect trader psychology in that major pivot points are also: major Fibonacci retracements, major

levels of support or resistance, and sometimes Elliot Wave retracement levels. While all three of these

types of systems are quite subjective, there will be enough traders in the market using these methods

to turn a pivot point into a ‘battle ground’ between buyers and sellers. Price action speeds up around

pivot points and makes it a lower-risk entry or exit point. Remember, no system will forecast with

100% success. What we’re seeking to do is lower our entry and exit risk and raise our odds above

random entry. Research I’ve conducted has shown most traders actually have odds worse than random

entry, because of poor money/risk management (i.e. over-trading, poor stop management, etc.) and subjectively using Technical Analysis.

“How to Trade Pivot Points”

While there are several advanced techniques for trading pivot points, we will cover some of the most

basic, and therefore, easiest to trade techniques in this chapter. Here you’ll discover how to use Pivot

Points as a guide for entry, exit and stop loss orders.

The first step to trading pivot points is calculating them using historical data.

After calculation, you will be presented with 9 pivot points and a period high and low.

Enter the

market in the direction of the trend and never buy within the top 3 pivots or sell in the bottom three

pivots. Set your stop limit outside of the nearest opposite pivot point and plan to exit (or set a limit

profit order) outside the next pivot in the direction of the current trend. pivots based on 15min bars, zoom in to a 5minute chart and time your entry in accordance to this

faster chart’s price action. This technique is the fastest and quickest way to use pivot points.

Depending on volatility, you can be in and out of a trade in several hours.

There are many different ways to use Pivot Points in your intraday trading strategies. Combine them

with other indicators as Pivot Points perform admirably as ‘filters’ for false-signal-prone indicators.

“When to Trade Pivot Points”

Start your trading day with 24 hour pivots to get a ‘big picture’ of the daily market. Then

zoom in on a trading zone and jump into the market when pivot point levels, other

indicators or patterns confirm. Adding Pivot Points to your trading toolbox means you now have an

automatically updating grid that enables you to view the market and price action objectively.

Pivots, Resistance and Support

As prices continually rotate to enhance trading, prices of perceived value (support) and perceived over valuation (resistance) can be recognized by the volume of activity at different price levels. The active range of trading expands as the off floor traders enter the fray. If more longer established support and resistance can be successfully breached during the new short term trend that emerges, with the activity of the off floor traders, then longer term traders, position traders, with an intermediate or long term intention of their market commitment will be attracted to join the market.

If one knew the range parameters of support and resistance used by floor traders one would have a handle on the significant areas where off floor and possibly position traders may take over the market direction from the rotating locals. Well the locals calculate from the previous day's range the pivotal or inflexion price and the areas of support and resistance. The calculations are very simple and the results invariably have an influence on the market activity of the day. In fact, if no other information that relates to the market becomes available then the floor traders parameters may dominate the day.

The calculation for the new day are calculated from the High (H), low (L) and close (C) of the previous day.

• Pivot point = P = (H + L + C)/3

• First area of resistance = R1 = 2P - L

• First area of support = S1 = 2P - H

• Second area of resistance = R2 = (P -S1) + R1

• Second area of support = S2 = P - (R1 - S1)

So unless significant market news has been made available between yesterday's close and today's opening you can expect locals to take prices to test the near term support and resistance and the pivot price. Should, for any reason, these near term support and resistance areas fail then the second such area will likely be tested. If these support or resistance areas fail, because of market influencing news or observations, the off floor or, more particularly, intermediate term positional players will likely enter the market and make the market trend.

So these floor trader pivot points are areas to be aware of and respect. They are both dangerous and areas of opportunity. Stop orders to enter at these points are readily whipsawed by 'floor sweeping' by the locals as they rotate up and down the perceived range. On the other hand, if you find support or resistance was forthcoming as appropriate it offers a low risk entry point with a close Stop loss point identified. On the other hand, failure of anticipated support and resistance, as appropriate, offers a low risk entry point with a close Stop loss point identified in what is likely to be a trend emerging from the 'local' noise of the market.

Even if you are not a day trader, knowing the key pivot, support and resistance points can help the short term off floor and intermediate positional trader to identify potential entry points and stop loss levels for your trade if your other criteria have determined the direction in which you should be trading.

Make it a daily ritual, calculate the pivot point and the areas of support and resistance after the close each day for the markets you are interested in. Study the next day's price action in the context of those pivot points so that you get familiar with the dynamics of the market.

I am located on the west coast USA. That's part of the reason I developed this method - I needed something that allowed me to take advantage of the moves that occurred during London without haveing to be awake during London. I am currently using InterbankFX as my broker. They are OK, but a bucket shop nonetheless. And I am using MT4.

I have MT4 through InterbankFX . Are they down.? I am in California and I havn't been able to bring MT4 up for 2 hours. My husband gets MT4 through another company and that one is not working.

Thanks so much man. You are extraordinary helpful! -- scardi

I had no interruptions in MT4 on Interbank during all of yesterday.

John, thanks for your best method.
Now i used this method but many trade lost. I think I do not master the method completely. Could you give me some picture and let me learn?
Thanks in advance.

I second the request for more charts. I really like this thread but don't feel i am yet able to readily pick setups out of the 30 minute charts. to JohnW, FXNorm and anyone else using this successfully, please post some of your charts as they happen and help more of us to learn.

This thread amazes me. All of these people trading and nobody asks for an account statement showing the amazing 97% win rate.

But hey, its only money...