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Great info bob,
Why don't repost the entier piece from Walt.
Thanks.
Andrew S.
-----Original Message-----
From: Bob Hunt <RHunt.066@xxxxxxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Saturday, March 20, 1999 5:29 AM
Subject: Floor Trader Pivot Points
>Walt Downs sent an excellent piece on trading to the RT forum about 2
>to 3 years ago. I thought it was so good that I kept the entire thing.
>
>A section of it had to do with Floor Trader Pivot Points, which I've
>included below.
>
>****************************************************
>
>How the Majority of Floor Traders Trade (by Walt Downs)
>
>Did you know that most exchanges don't allow computers in the "pit" ?
>How then, does the average Floor Trader know where the support and
>resistance areas are, and how does he trade against them or with them
>in general. The answer for most Floor Traders is the use of a somewhat
>mechanical framework refereed to as the "Pivot". What follows is the
>formula for calculating the "Pivot" and it's resulting areas of
>support and resistance, and how Floor Traders use it to trade:
>
>Formula for Pivot and Associated Sup/Res Levels
>P = Pivot
>NH = Next High
>HH = Highest High
>NL = Next Low
>LL = Lowest Low
>O = Open
>H = High
>L = Low
>C = Close
>
>P = (H + L + C) /3
>NH = (2*P) - L
>NL = (2*P) - H
>LL = P - (NH - NL)
>HH = (P - NL) + NH
>
>Extended formula for recalculating the Pivot and Sup/Res levels after
>trading has been
>going on for a few minutes:
>
>Recalculate Pivot by using the formula: P = (H + L + C + Today's
>Open)/4 Then, recalculate the sup/res levels using the new Pivot
>number, and the H,L, and C, as stated in the above formula.
>
>How Floor Traders Trade the Pivot in General
>
>The Pivot is the average price that the market has traded at. IF
>
>Market in Uptrend, and Price > Pivot THEN the Floor BUYS.
>Market in Downtrend and Price < Pivot THEN the Floor SELLS
>Market trading in Range THEN the Floor SELLS the NH and BUYS the LL.
>Market trades above HH, THEN the Floor BUYS
>Market trades below LL, THEN the Floor SELLS
>
>In making sure that you keep the "big" (For an ST Trader ) picture in
>mind, it is often a good idea to calculate the Pivot numbers for 1
>weekly OHLC bar as well.
>
>*************************************************************
>
>I should probably make a quick comment about something that Walt
>mentioned in his piece. He talks about re-calculating the pivot
>points after the open of the particular trading day is known. The only
>time that I've found this handy with T-Bonds is when there has been a
>gap opening of at least 12-16 ticks, or when there has been a very
>rapid, large move such as sometimes occurs after Unemployment Numbers
>are released. It just makes sense that after experiencing such a
>"price shock" the market would need some sort of reorientation. These
>parameters can easily be included in your code, but for starters, I
>wouldn't worry about adding this extra level of complexity. However,
>you might want to look into it when your level of proficiency
>improves.
>
>Bob Hunt
>THE T-BOND DAY TRADING REPORT
>e-mail: rhunt.066@xxxxxxxxxxxxxxxx
>
>
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