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Don Thompson and all,
In answer to your questions a good explanation for the use of pivots is
contained at the following site. Keep in mind when playing around or
seriously using pivot numbers the reason they are important key numbers
is they are a current price range study and used by many floor traders,
market makers and other professional traders as a simple non-computer
method to know where the price is at during a trading session.
Off-beat pivot numbers creatively developed by other technicians are of
no value as they are not being used by the vast majority, which is
exactly what makes them meaningful at all. So if you intend to use the
pivots be sure to use the traditional formula that the trader's use.
Good Trading,
JD
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<TITLE>Heads-Up Table road map</TITLE>
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"<I>Ideas for a better<BR>
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<B>Heads-Up Table</B></I>"<BR></font>
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<!--<HR size=2 noshade>--><I>Heads-Up</I> Table</I>
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<CENTER><I>We strongly suggest that interested readers print this page for more thorough reading. Simply select "Print Frame" from your browser's "File" drop-down menu.</I><BR></CENTER><P>
<h4>Table Description</h4><font size=-1>
Support and resistance are actually the same thing, differentiated only by whether the level is being attacked from above (support) or below (resistance). These levels are at first easily discernible by noting where price action tends either to reverse or to break sharlpy upon being tested; too many unsuccessful tests (reversals) and the level is more likely to be broken upon a subsequent test. Other support and resistance points are part of a pattern that is formed during trading, such as a triangle, a head & shoulders, a wedge or flag.<p>
These patterns both reflect and create growing buying or selling pressure, and depending upon where they occur within or following other patterns, they project certain targets. These targets, in turn, theoretically satisfy that accumulated buying or selling pressure, and are by definition natural support or resistance levels; a move that continues beyond these levels is likely to continue to the next support or resistance.<p>
One may notice that the table reports both upside and downside targets. Patterns can always be interpreted in at least two ways, and even when one is invalidated by a breakout in the wrong direction, it may later become active. While our daily <B><I>Heads-Up</I></B> column takes an opinion, the table may keep alive the outstanding and as yet unfulfilled targets of previous patterns.<BR><p><HR size=1 width=75%><P>
<H4>A <I>Heads-Up</I> Table Roadmap</H4>
<UL><UL>
The following is presented solely as a means<BR>
for better understanding the <B><I>Heads-Up</I> Table</B><BR>
and the probability that certain market action<BR>
will follow the attainment of any of the table's<BR>
entries. The rules outlined herein are not meant<BR>
to be used as a stand-alone decision process<BR>
for executing transactions.</UL></UL>
We could have placed the above disclaimer at the end of this "Roadmap" description, but a careful reading of it first will help to better understand the <B><I>Heads-Up</I> Table</B> application to day-trading the various markets the table covers. The importance of this concept should not be taken lightly. The "Rules" stated below are simply a roadmap to anticipating subsequent subsequent market action.
<P>
The Heads-Up table offers four entries each for Resistance and Support. These levels are determined by patterns that have evolved during the most recent trading. Because patterns often evolve within or otherwise during other patterns, and because either may project to a higher target while the other projects to a lower target, the Table is not making any statement that trading will trend to either level.<P>
<UL>==> <B>Rule #1</B><BR><DD><B><I>Resistance and Support are not targets.</I></B></UL><BR><P>
We cannot even rely upon the attainment of these levels to signal a reversal, though they often cause trending to stall, either in a consolidation or small bounce higher or lower. However, when subsequent market action does prove that the attainment of one of these levels was either the high or the low for the day, prices tend to reverse to the opposite support of resistance. as an example, if morning trading action sees prices trade lower to fulfill the table's Support</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>and then reverse higher, odds favor that Resistance</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>will be met.<P>
<UL>==> <B>Rule #2</B><BR><DD><B><I>If Resis</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>or Support</font><sup><font size=-2>1</font></sup> <font size=-1 face=arial color=eeeeee>holds, then trading should<BR><DD>reverse to the opposite Support</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>or Resis</font><sup><font size=-2 color=white>1</font></sup></I></B><font size=-1 face=arial color=eeeeee>.</UL><BR><P>
There are three ways to act on this. The first was created by famous market tactician Will Rogers who said, "<I>If they go up, buy them; if they don't go up, don't buy them</I>." We can discard that one for obvious reasons. The next rules, however, have different degrees of aggressiveness. Remembering that neither the Resistance</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>nor Support</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>levels are reliable for actually reversing a trend, one can anticipate a reversal by gauging the quality of the subsequent action. If a consolidation evolves following the Resistance or Support level's attainment, and a re-test of that level is followed by a move beyond the consolidation's extreme (the consolidation's high if having tested Support, or the consolidation's low if having tested Resistance), the odds increase in favor of a reversal.
<UL>==> <B>Rule #3</B><BR><DD><B><I>If a consolidation evolves upon attaining<BR><DD>either Resis</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>or Support</font><sup><font size=-2 color=white>1</font></sup><font size=-1 face=arial color=eeeeee>, and a re-test of<BR><DD>the level</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>is followed by a break of the interim<BR><DD>consolidation's extreme, odds favor that<BR><DD>prices will reverse to the opposite level</font><sup><font size=-2 color=white>1</font></sup></I></B><font size=-1 face=arial color=eeeeee>.</UL><BR><P>
While it is more probable that such action will achieve the opposite level, it is less likely that the reversal will stop there. More often, the occurrence of a reversal as described in <B>Rule #3</B> above that meets the opposite Resistance</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>or Support</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>level will travel to the next Resistance or Support level. An alternate possible entry point may be to use a reversal to the opposite side of "even" on the day to enter the market, and a money-management technique may be to reduce exposure by some factor upon the level's attainment, maintaining the balance of the position in anticipation of further trending to the next level.<P>
The higher or lower the support or resistance levels, the larger are the measurements on which they are based in terms of both price and time, and their prices also tend to be larger in terms of price distance from current prices. Because patterns create either buying or selling pressure, it is more probable that the attainment of the larger patterns' projected targets will more fully satisfy that pressure. This naturally creates resistance or support, and when combined with a prior resistance or support level, it becomes less likely that prices will continue to maintain a trend beyond that level.<P>
The "roadmap" quality of this observation can be applied in two ways. Obviously, the first application would be to anticipate that the current trend will stop; often, this results in a move back to prior resistance or support, which has now taken on the opposite role of becoming either support of resistance. If prices then reverse back to break through the level that originally held, the table's next resistance or support becomes the next objective.<P>
<UL>
==> <B>Rule #4</B><BR><DD><B><I>Resistance and Support become either Support<BR><DD>or Resistance, respectively, for the balance of<BR><DD>the trading session if prices break through.</I></B><BR><P>
==> <B>Rule #5</B><BR><DD><B><I>Breaking either Resistance or Support as<BR><DD>defined in Rule #3 above targets the next<BR><DD>Resistance or Support.</I></B><BR><P>
==> <B>Rule #6</B><BR><DD><B><I>Attaining Resis</font><sup><font size=-2 color=white>2</font></sup> <font size=-1 face=arial color=eeeeee>or Support</font><sup><font size=-2>2</font></sup> <font size=-1 face=arial color=eeeeee>as defined in<BR><DD>Rule #5 above generally causes a reversal<BR><DD>back to at least Resis</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>or Support</font><sup><font size=-2>1</font></sup><font size=-1 face=arial color=eeeeee>, now<BR><DD>labeled Support</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>or Resis</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>respectively, as<BR><DD>defined in Rule #4.</I></B><BR><P>
==> <B>Rule #7</B><BR><DD><B><I>Breaking either Resistance or Support<BR><DD>targets the table's next level.</B></I>
</UL><BR><P>
. Therefore, if prices re-test either Resis</font><sup><font size=-2 color=white>2</font></sup> <font size=-1 face=arial color=eeeeee>or Support</font><sup><font size=-2 color=white>2</font></sup> <font size=-1 face=arial color=eeeeee>following an interim consolidation that successfully tests Resis</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>or Support</font><sup><font size=-2 color=white>1</font></sup>, <font size=-1 face=arial color=eeeeee>that re-test's importance cannot be over-emphasized. While a breakout will probably target the table's next level, a failure to breakout upon the re-test generally finishes the trend. A confirmation trigger could be a subsequent break of the interim consolidation's extreme.<P><UL>
==> <B>Rule #8</B><BR><DD><B><I>Failure to break Resis</font><sup><font size=-2>2</font></sup> <font size=-1 face=arial color=eeeeee>or Support</font><sup><font size=-2>2</font></sup> <font size=-1 face=arial color=eeeeee>upon<BR><DD>a re-test following an interim consolidation<BR><DD>that tests Resis</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>or Support</font><sup><font size=-2 color=white>1</font></sup> <font size=-1 face=arial color=eeeeee>generally ends<BR><DD>the trend.</I></B></UL><BR><P>
<UL><UL>Not to beat a dead horse, but the description and rules outlined here are best used as confirmation of observations that a trader may be making in real-time as a trading session progresses. For instance, a sharp morning break that tests Support-2 may also be accompanied by a bearish news report, a large negative tick reading and declining issues far out-numbering advancers. The Table's input is no more predictive of subsequent market action than the other two observations, but when the seperate observations are combined they become powerful: certainly, the odds of a reversal increase, but traders are urged to use the <B><I>Heads-Up</I> Table</B> as they would any other measurement of market internals, not as a signal, but as a roadmap.<BR></UL></UL>
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</HTML></x-html>From ???@??? Sun Feb 08 10:05:33 1998
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From: ric ingram <ringram@xxxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: PSYCH and SILVER
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Status:
There may be several lessons to be learnt from the recent Silver thread
from the perspective of the psychology behind the comments and responses.
Quite insightful into my own thought processes - always a valuable
self-development processs for a trader.
If you get the digest version - 690 is the number - you may get much
insight into your own thinking. Hope it proves as valuable for you as it
is for me.
Regards, Ric.
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