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On a day like this where the markets seeing one of the worst days, I thought does the market always respect Pivots S3 and R3 as the daily limits for extension? Did some of you experiment with these tests? It was critical today as I was watching many futures struggling to stop their breakdown at S3.
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Can you help answer these questions from other members on NexusFi?
In my experience that is usually the case but like everything else it's not chisled in stone....I have seen them get surpassed a few times. In those cases the are likely to come back to them at some point. When it comes down to it, like anything else make sure you have some kind of p/a before jumping in....
Pivots are fake numbers that randomly line up because of current volatility vs yesterdays price.
What you are ultimately saying is "intra day volatility will not exceed threshold x"
You can backtest that all you want but you have neither said anything predictive about current volatility OR X so why bother?
I don't know why anyone trades pivots and not just intra day high/lows...It is not that much less signals and you at least know everyone else knows the level without question.
People make businesses though out of selling pivot level + y...even when y is totally random.
I can see though how a trader could use pivots as a filter for price action, but that is assuming you understand the idea that there is as many trades to take a day as there are ticks on your instrument and you need a filter.
Still there though, I don't think it is the best filter..but retail likes things to be more "mystical" than trading just high/lows so that will never catch on.
The less "mystic" setups are, the more obvious you don't know what the fuck you are doing.
I might have to disagree with some of this...on forex, yes pivots are no good really but on futures they do have signifigance and are traded around or off off all the time...I make use of them myself and find them of value. I could show you about a million examples.
First of all, there are two different formulas widely spread for the pivots S3 and R3. You are probably referring to the wider pivots. The details can be found in this post.
Short explanation on narrow and wide pivots. I added the formula for wide pivots on your spreadsheet.
Narrow pivots formula: Adding daily range to R1 or subtracting daily range from S1
R3 = R1 + (H-L) = H + 2*(P-L)
S3 = S1 - (H-L) = L - 2*(H-P)
Wide …
Further more, you can not expect that price does not move further at any of the pivot levels, whether it is S2, S3, S4 or R4.
The main pivot PP is essentially a proxy for value. All other pivots are range targets based on the volatility of the preceding day.
-> When the preceding day was a narrow range day, the pivots of the next day will cluster together, so price can easily move to S4 or R4
-> When the preceding day was a wide ranging day, the pivot levels of the next day a quite far away from each other and you might consider to add midpivots to your chart
I use pivot levels in conjunction with the average daily range of the last 4 weeks. The average daily range is more useful in determining the area where a daily move will stop, as intraday traders are exhausted.
