I’m excited, and it’s because I have recently added another tool into my trader’s toolbox.
For quite some time now, I’ve been using wave trades using Fibonacci sequences for my primary entry technique. While this great trend following system typically gets me to my breakeven stop without too much problem, ( I trade crude futures and go to a breakeven stop when I’m 7 ticks up), the one thing that has always been missing is a way to have a much greater probability that I’m getting in at a place where the trade can rocket 50 to 100 ticks.
Since that typically has been happening only 1 out of 7 times, I’ve been continually frustrated. How can I know when and where to use my wave patterns to get in? The dilemma has always been: If I hold for a big move, more often than not the trade will roll over at 10 ticks and stop me out at my point of entry. So, if I take 10 ticks off the table, that’s great, but that’s not very much profit, and then occasionally, i will see my trades rocket, but I’m already out with a small profit. And small profits don’t make you rich, especially when you are a small account trader. So, what’s trader to do?
I’ve discovered floor trader pivots, and they are really powerful.
My trade plan has evolved to include them in my methodology, and now I’m getting those 30, 40 and 50 tick moves much more regularly, moves that I’ve been dreaming of but not able to hold on to in the past.
This has come about for a couple of reasons. First off, I’m in a new live trade room where these are shared. This probably would not have been enough by itself, because the pivots tend to be launch points and targets, but they really don’t tell you direction. You have to calculate direction for yourself.
But, that’s ok, because my training has been in trend following methodologies. So when price approaches a pivot as part of a Fib Sequence wave (either a 13, 21,34 or 55 range wave pattern, it’s easy to see the direction that price should be moving as it reaches the pivot.
Finally, there’s another factor, and that’s a chronological power point.
What I’ve also noticed is that these large sweeping moves almost always originate at one of the following:
the oil pit opening at 9 AM Eastern
The equities open at 9:30 AM Eastern
the European open at 3:00 AM Eastern
At Major News Events, which happen typically at 8:30 AM, 10:00Am, and various other times throughout the trading day, depending on the specific news event.
So, the trading plan goes something like this:
Keep an eye at the key times, the first being the pit open at 9 AM
As these pivotal times of day approach, look for a confluence of a wave pattern and a Floor Trader Pivot level (FTP) level.
If all three match up, you have an awesome opportunity on your hands.
For example, this morning, in crude, on Jan. 31, 2012, on of the key FTP levels was 100.06. The next one up was at 100.63, and another at 101.37. At precisely 8:59 and 55 seconds, the price moves up to 100.06. Big volume comes in. At 9:00 am sharp, as the oil pits open, price moves up to 100.09. On my charts are a 55 range wave pattern, a 34 range wave pattern, and a 21 range pattern in the formation stages, all pointing up.
I didn’t need anything else. I went long at 100.09. Within seconds price rockets up to 100.60. My trailing stop, which was set pretty tight once I am up 40 ticks, took me out at 100.55 for a 46 tick profit ($460). That’s one contract of profits. Two contracts would have given me $920, etc., etc. The most that was ever at risk was 10 ticks and i experienced zero heat on the trade. I was at break even within seconds and into substantial profit within a couple of minutes. Within a few more minutes, price reached 101.29, only 8 ticks off the next pivot. As I write this, price has totally collapsed, and rocketed down below the first pivot mentioned, But the point is, that was a 100 tick plus move.
The next thing I did was very smart, at least for me. I called it a day. Up about $460, I simply took the rest of the day off, with one trade under my belt. Tha’s all I needed. It was a very very high reward to risk ratio, because it had all three factors lining up. I only spent $5 on commission and would not need to generate anything else for my broker.
I exceeded my daily goal of $350 and so no need to push it. I’m satisfied.
It’s not what you make, it’s what you keep. Remember that.
Anyhow, my excitement at discovering floor trading pivots and adding them to my arsenal of trend trading mixed with being highly selective as to the times I’ll trade are really helping me in the profitability dept. I highly suggest to any traders looking for a better reward to risk ratio to look into using confluence in this way.