Free signal generator for traders

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Della Osborne
5 years ago
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1 Free signal generator for traders Trader s Bulletin Pivot Point Trading Strategy 1. Just download the FREE tool 2. Key in a few numbers 3. And follow the simple techniques by Mark Rose

2 To make money from trading, it s pretty simple you need to buy when the prices are going up; you need to sell when they re going down. But, if you ve ever tried to do this, you ll know how tricky it can be to get in at the right moment. And if the market is moving the right way for you you ve then got the decision of when to get out! That s why I believe the signal generator here is such an invaluable tool for traders. These are simple lines you can draw on your chart, give you information about where markets are likely to turn where a move is likely to run through and where you should watch out. All you need to do is plug some figures into the calculator each morning (I ll show you exactly where to find this data) and it ll automatically tell you where these key levels are. Then, follow the simple techniques I ll show you in this short guide, and you can quickly develop your own successful trading system. What s so special about these numbers? The levels that your signal generator gives you are called Pivot Points. And these are nothing more complicated than five horizontal lines you can draw on a price chart each morning. In this guide, I ll show you how to draw in these lines, plus I ll give you the techniques you need to turn these lines into profits.

3 Part One: What are pivot points? Pivot points are five horizontal lines that you can draw on your chart every morning that give you some serious clues about which way the market will go where it might bounce back or hesitate and where you can expect a breakout to move to It only takes a few moments each morning to calculate these levels and mark them up on your chart. I think you ll find that it s time well spent. What the markets hinge on Once you get used to seeing pivot points on your chart each morning you ll feel lost without them. For many years, traders have used these support and resistance levels, and you ll find that they really come into their own when you re looking for entry and exit levels for your trades. The key pivot points are 5 levels: central pivot point; resistance 1; resistance 2; support 1; support 2. Plotted on a chart, they ll look something like this:

4 This chart is a day that I chose at random from the FTSE. The green line is the central pivot point this is our most important level. Above it are two levels of resistance: R1 & R2. Below it are two levels of support: S1 & S2. Each of these lines can offer a degree of support and resistance to the price. Now I d like to show you exactly how to calculate these levels and put them up on your chart. No maths involved! To save you the calculations involved in working out these pivot points, you can instead use the pivot point calculator signal generator. This is just a very basic Excel spreadsheet, and it s free to download from the Trader s Bulletin website.

Simply hover your mouse over the last full day s candle, and you ll see the data for that day show up at the top of your chart (this

5 Pivot Point Calculator CLICK HERE TO DOWNLOAD YOUR SIGNAL GENERATOR All you need to do is check the high, low and close prices on the daily chart for the previous day s trading, and input those into the calculator. You can find these figures by looking on a daily chart. Simply hover your mouse over the last full day s candle, and you ll see the data for that day show up at the top of your chart (this works slightly differently depending on which broker you re using if you have any trouble finding these figures, just contact your broker).

6 Enter the High, Low and Close figures into your calculator The calculator will automatically give you your five key pivot point levels.

7 Switch your chart to a smaller timeframe that you work on for day trading (say a 5 or 10 minute chart), and add these five levels to your chart. You ll also see on the calculator some more advanced levels R3 & S3, plus mid-levels of M1, M2, M3 and M4 (we ll get on to those later). Using pivot points in forex trading Pivot points can be applied across all instruments, including forex. However, because forex markets are 24-hour, you need to give a little thought to what reference you re going to use for highs, lows and closing prices for the trading day. Some traders will use pivot points based on Eastern Standard Time, others will use points based on GMT. Both are valid, and my advice would be to work with the session that you trade i.e. if you re trading the London session, use GMT. If you re unsure what times your broker s prices work to, it s worth dropping them a line to double-check. How to use pivot points to make profits Pivot points are powerful tools for identifying entry and exit levels, and for spotting the key levels that need to be broken for a move to qualify as a breakout. Next, I ll show you some quick and simple strategies that you can use to apply these tools to your trading.

8 Part Two: Pivot Point Strategies Now that you understand what pivot points are, we re going to hone in on exactly how you use these tools to make profits by daytrading. This doesn t apply to any particular instrument pivot points are valid across equities forex commodities But remember, daily pivot points are only valid for that day s trading. Tomorrow, there ll be a new set of figures. Ready, set, go Okay, I hope you ve got your five lines set up on your chart: R2, R1, P, S1 & S2 Remember, these are all valid support and resistance levels. So, let s see how we can use them. 1. THE TRADING CHANNEL Here s a 15 minute chart showing a days trading on one of the major European indices:

9 It shows very typical behaviour around the pivot points: - The price opens near to the central pivot; - It moves towards the central pivot; - It bounces off the central pivot; - It trades mainly in the range between the central pivot and the next pivot point level. When a market isn t trending strongly in one direction of another, this picture represents a very common way for the price to behave. Plus it shows us how simple it can be to collect profits by trading within this channel. We don t enter this trade until the bounce off the central pivot level is confirmed. Once we re confident of the rebound we can open a trade and collect profits at the next pivot point.

10 Meanwhile, our stop loss can be tucked safely on the other side of the central pivot point. 2. PIVOT POINT BREAKOUTS Here s the same chart that I showed you earlier I chose this at random from the FTSE. It may not be a text-book example of how pivot points can work, but, day-to-day charts rarely look like the ones in the text books, which is why I believe we should learn trading like it really happens. What I hope this shows is that pivot points can be a real day-to-day work-horse for the trader.

11 What we see first is that the day s trading opened above the central pivot point (the green line) this is a bullish sign, and tells us that we should be looking for buying opportunities today. We expect the price to move down towards the central level, or up towards R1, then to either break through these levels or rebound from them. If the price moves down to the central pivot point, we could anticipate a rebound back up to the R1 level. However, this isn t what happens. Instead, the price moves up through R1 this could be our signal to enter a long trade, with our profit target at R2. Later in the session, the price moves back through R1 again, offering another buying opportunity in the direction of R2.

12 This is the gist of how trading breakouts with pivot points works. But it shows the difficulties, too. The profit potential of this chart is complicated by a couple of factors. The first is the nasty whipsaws down below R1 before our profit target is reached. These aren t uncommon with pivot points, so you need to think about how aggressive you want to be with your risk/reward ratio. If your stop loss is too tight, you ll find yourself getting knocked out pretty often. The second is how you re going to get confirmation of a breakout (or a rebound). If we wait for a second candlestick, we may find that a good chunk of our profits have been eaten up. 3. PIVOT POINT CONGESTION TRICK The final strategy that I want to show you takes advantage of exactly that congestion that can cause problems in the other two strategies If you notice congestion building around one of the pivot points you can use this to your advantage. Draw in a channel, showing

13 you where the congestion is, and set an entry order on the break of this channel, like this: When the price does finally break free of this congestion, it s likely to move to the next pivot point and you can be ready to catch this move.

14 Part Three: 10 Tips for Pivot Point Trading 1. Pivot points are calculated from the previous day s highs and lows. It s easiest to pick this data off a daily chart, but when you come to plot and use your pivot points, you ll need a shorter timescale that s suitable for intraday trading (5, 10 or 15 minute charts, for example). 2. Note where the market opens. Normally it opens relatively close to the central pivot point. If it s above the central pivot point, it s considered a bullish sign, and we should be looking for buying opportunities. If it s below the central level, it s considered bearish, and we should be looking for selling opportunities. 3. If the market opens above R1 or below S1, this is considered a distant opening, and it is likely that the price will correct itself, pulling back towards the central pivot point. Trading this kind of set up is more difficult, and I wouldn t recommend it for pivotpoint novices. 4. The price has a natural affinity to the central pivot point. If there is no news affecting the market price, it is likely to trade for the day between the pivot point and S1 or R1. However, significant news can cause the price to move through S1 or R1, to S2 or R2, or even beyond to the very volatile areas of S3 or R3. 5. Don t enter a trade until the price has clearly broken through or rebounded from one of the pivot points. How you decide on what constitutes a rebound or a breakout will depend on your strategy (how many pips you re trying to make, what timeframe you re working to, etc). Whatever your criteria, be careful not to anticipate this move as there can be a lot of congestion around the pivot points. Waiting for a second candlestick is a common method of confirming the signal. 6. When the movement is confirmed, we enter our trade, with the next level as our profit target, and our stop loss positioned at a safe distance behind the breached level. Here s an example from Eur/USD:

15 7. You ll notice that I didn t enter another Sell trade at S2. The reason for this is that S2 and R2 are considered the daily floor and ceiling i.e. we don t expect the price to move beyond them. That s not to say that they can t be breached, especially in a strongly trending market, but the tendency of the price is to move back towards the central pivot point, so this is not a good area to be trading in. The general rule is: the further the price moves away from the central pivot point, the weaker the trading opportunity. 8. Mid-lines are the halfway levels between your 5 pivot points. The calculations for these can be found on the Pivot Point Calculator, along with R3 and S3. These are not strong areas of support or resistance, but can be useful extra guidelines for setting stop loss levels. 9. When trading pivot points, be mindful of the medium-term market behaviour. In a sideways market, the price will often fluctuate neatly between PP and R1 or S1. In a strongly trending market, we can expect to see pivot points breached more readily. As traders, we can take advantage of both of these scenarios, with channel trades and breakout trades.

16 10. Pivot point traders always try to catch the market when it is close to the pivot point early in the day this should offer the highest success rates. One of the most powerful ways to use pivot points is in combination with candlestick trading. This means that you can use simple clues in the shape of the candles to get an early warning of what the price will do when it reaches or gets near to a pivot point. Lots of candlestick training will pour over dozens of different patterns (many of which are very weak, or rarely even appear). If you d like a concise guide of the most important candlesticks, I recommend that you take a look at the Trader s Bulletin Price Action guide, which can be downloaded for free HERE. For more tips, strategies, reviews and trading advice, please ensure you re signed up to my weekly newsletter Trader s Bulletin at Mark Rose Traders Bulletin

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