What is the right way to Trade with Pivots?

When you say Buy above this level, and Sell Below this level; it means actually you don’t have any direction about the market or instrument. Basically this is a mechanical way of trading, without using any of your intellectuals. Here I don’t want to hurt feeling of any of the Trader who is already following some pivot rules very seriously and earning out of it. I respect them, but trying to make few points clear to novice traders.

When you apply any mechanical trading system, you should know what nitty-gritty’s are involved in developing system, back testing it, understanding its limitations, in which market condition there is high probability that your system will succeed or fail. But when any novice trader or even analyst exposed to some pivotal rule, generally he/she just check few past trades and directly jump into conclusion that is best or worse. Who cares to back-test method with thoroughly? Without back-testing any method in different market condition, how can you conclude whether it is good or bad?

I think many a times market stands at crucial junctures where there will be an equal probabilities develop to turn bullish or bearish, like according to my analysis few days back Nifty was standing at such point. But, every now and then if I am saying that market has equal chance to turn Bullish or Bearish, than either there is something wrong with my analysis or I am using such pivotal trading method, which gives me some mechanical answers about direction.

Some Do’s and Don’ts of Pivotal way of Trading

Do’s

  • Understand formula behind your pivot trading.
  • After understanding, just back test your formulae on your preferred instrument, with various possibilities, like in an End of Day basis, intraday basis, Hourly, Weekly and so on.
  • Just don’t back test recent data, check in all market conditions, and understand what is pros & cons of the system.

Don’t

  • If you are a part time trader, like if you are doing trading for earning some extra income and not seating live in the market, than I would suggest not entering in a market with such way of trading. It is not at all meant for you, although it sounds very attractive to you, because you don’t have to apply brains here. Please Avoid.
  • Without Back testing method, don’t enter into market with open knife, which can hurt you more.
  • If you are subscribed to a services and service provider sends you this type of recommendations than I think you should look for something else, because you are best client, to whom they provide service without any effort. Look for something else.

There are number of pivotal trading method, which are quite successful and used by many traders (mind it full time traders), some of them are.

  • Gann Square of Nine
  • Camarilla Pivot Trading.
  • Fibonacci Pivot Trading Method
  • Pivot trading based on Moving Averages

And there are number of other methods which are used according to convenience of traders.

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