Yesterday I used some faulty numbers that generated an area of confluence that absolutely did not exist!
I lost money.
I have double checked my numbers for tomorrow. Here are Tuesdays numbers:
Open: 1.2883
High: 1.3035
Low: 1.2829
Close: 1.2997
Based upon the above numbers, tomorrow’s pivots are:
R3: 1.3284
R2: 1.3160
R1: 1.3078
Pivot Point: 1.2954
S1: 1.2872
S2: 1.2748
S3: 1.2666
Good trading and good night!
Merriam-Webster defines confluence as: a coming or flowing together, meeting, or gathering at one point <a happy confluence of weather and scenery>. Well, well, well… we have a confluence of resistance around the 1.2900 level. In my last post (just a few hours ago) I talked about naked resistance between 1.2900 – 1.2920. After calculating tomorrow’s pivot points guess where R1 is?
Okay, I can’t contain myself! Its 1.2901!
It is right at the same level that has served as strong resistance for at least 30 days. This is what I consider an area of confluence, and thus a place where I am more willing to load up.
So the plan for tomorrow is to short, short, short any failure between 1.2900 – 1.2920.
If price gets above 1.2930 I’ll accept defeat and live to trade another day.
The following is a chart of the past months price action on the Euro.
A casual glance will show that over the past 30 days or so price has been trading in a 300+ pip range with strong resistance around 1.2900 and pretty firm support between 1.2620 – 50.
While I prefer to day trade, this looks like a perfect set-up for a low risk swing trade. Just look at the chart!
I’ll be looking to short any failure at 1.2920 (Euro likes 20 & 80), risking no more than 21 pips and looking to book 300 pips.
Stay tuned! 
Since I missed the Euro trade, I have been keeping my eyes open for other opportunities and low and behold, the markets gave me one.
The Swissie has been in a down trend for a while and while I did not expect this pair to reach R1 today, it surprised me and raced to it in the last 45 minutes. So… short at 1.0150
The ones you miss seem to always turn out well.
R1 right down to the the pivot.
EURUSD has been in a down trend for a few weeks. In a down trend I like to look for short opportunities when price has mini-corrections up to R1. Looking at the chart it looks like I missed the trade while dropping my kids off at school.
Price is more than 21 pips away from R1 so there is no way I am entering this trade as in order to keep my risk:reward ratio favorable, all of my trades must be low risk. However, if price does go back to test R1 I will consider a short, but at this point I will not chase.
Missed opportunities always bring up the question of resting orders. If you have an edge and want to enter the trade when price hits your levels, why not just put a limit order in and let the chips fall where they may?
I don’t really have a good answer for that. I just prefer to watch the price action, switch to a lower time frame and get a feel for what might happen. Trading is not an exact science, but more of a grey area art. Maybe over time I’ll get more comfortable automating my trading, but for now I have to sitting in front of the screen for it to happen.
Yesterday I discussed trading with the trend. Today I will show you an example trade. All of the currency pairs I watch are in an overall down trend. I chose to trade USDCHF because it was the pair closest to R1.
The chart shows a down trend line that has been in play for a few days. Price briefly pierced the trend line, but could not close above it on any significant timeframe (5mins or higher). You might also note that the red dotted line is R1. Ideally I would have liked for the price to reach R1, but if you wait for perfect setups you won’t be very successful. You must learn to trade in the grey areas. In this situation the trend line with R1 in close proximity was enough to know that a low-risk short was in play.
Switching over to a lower timeframe allowed me to pinpoint an entry.
The small diamond on the chart shows an entry at 1.0133 just under the tred line of 1.0136. R1 is just 10 pips away at 1.0143, so placing my SL 3 pips above that means I am risking 13 pips on this trade. My first target is the yellow line which is the daily pivot point. I took half off at the pivot of 1.0112 and am looking to take the rest off just above the green dotted line which is S1 (1.0081).
The white line is a 21 period moving average. There is really no need for it and I probably should have taken it off of the charts before taking the screenshots. No need to complicate things. Just remain patient and trade with the trend.
I am fond of pivot points. The trades in which I’ve made the most money and been the most consistant have all involved pivot points. Do I think pivot points are the holy grail of trading? NO! But I do think that enough people use them to make them effective.
Look at this image of this mornings Asian and European sessions. The red dotted line was R1, the yellow solid line the pivot point, and the green dotted line S1.
Remember for forex, pivot points should be calculated at 5PM EST. So the lines were calculated and drawn before the overnight price action occurred.
Draw your own conclusions.
The Pivot Points have been treating us right recently, so lets see if the trend continues.
Looking at the following chart we see that there is nice resistance at 1.2738.
After calculating the daily pivot points I immediately notice that R1 is 1.2740. Hmmmm…. Digging a little deeper I see that yesterdays high was 1.2744. An area of confluence (1.2738 – 1.2744).
The overall trend is down and we have confluence at resistance. This very sophisticated analysis (hint of sarcasm) tells me I want to get short somewhere between 1.2738 and 1.2740.
The game plan is to patiently wait for price action to reach 1.2740 and SHORT with a 21 pip stop. First target is the pivot 1.2683 and the second target is Tuesdays low of 1.2663 (Break-even Stop). If everything goes according to plan this trade will give a minimum of 1:4 R:R.
Everybody has heard of pivot points (if you don’t know what pivot points are get in touch!) and there are a million different ways to use them. A lot of traders use pivot points in conjunction with indicators. But I have found a simple technique for exploiting the magnetic effect of pivot points.
Are you ready? This strategy is so simple it might scare off some people. Here goes…
That’s it! Simple as pie and when combined with your money management it should equal a low risk yet profitable trading strategy.
Below I’ve include a chart of NZDUSD from this morning to demonstrate. I know from looking at a 240 minute chart that the trend is down. All I have to do is patiently wait for the price action to drive the price up to R1.
For this particular trade I entered at .7083 with a 10 pip stop (.7093)