Pivots on the floor

...continued from yesterday...

My search of the internet indicates that “pivots” are most frequently associated with Floor Trader Pivot Levels calculated according to the following formula:

PivotPoint = PP = ( Yesterday’s High + Yesterday’s Low + Yesterday’s Close ) / 3

Resistance Level 1 = R1 = PP * 2 - Yesterday’s Low
Resistance Level 2 = R2 = PP + Yesterday’s High - Yesterday’s Low
Resistance Level 3 = R3 = R2 + Yesterday’s High - Yesterday’s Low

Support Level 1 = S1 = PP * 2 - Yesterday’s High
Support Level 2 = S2 = PP - Yesterday’s High + Yesterday’s Low
Support Level 3 = S3 = S2 - Yesterday’s High + Yesterday’s Low

A different formula is presented in Tricks of the Floor Trader: Insider Trading Techniques for the Off-the-Floor Trader

Floor trader Neal T. Weintraub uses the following Pivot Point formula:

PivotPoint = PP = ( Today’s Open + Yesterday’s High + Yesterday’s Low + Yesterday’s Close ) / 4

He uses the same formulae for calculating the Resistance and Support Levels as above. Additionally, he filters the Pivot Point signals with a moving average, buying only if the signal is long when above the moving average and shorting only if the signal is short when below the moving average. Even then, he says that whipsaws are frequent and that less than half the trades taken on the Pivot Point signals are winners.

...continued tomorrow...

Copyright 2008 Raymond T. Lee. All rights reserved.
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