Daytrading Course
Learn to Read the Tape
Exploit Pit Pivot Points
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PIVOT MAGIC JOURNAL - EXCERPT

Good morning,

We sure called it in yesterday's PERSPECTIVE:
" . . . The tape is now beautifully set up for a test of the LT SW Channel floor . . . "
Got that right - Three failed attempts (failed TTT) in fact.

Even though we had to let the opening reversal go, we took a nice bite and had a few
more nice (read: profitable) rides throughout the day.

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Pivot Magic Trading
First rule:
"Any time you don't know what is happening, get out!"
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E-mini
Wednesday June 18, 2008

Session opens gap-down between S1 and S2, and trades up to test the S1 Resistance.

1 = Great reversal off the S1.

NOTE A: Some years ago we tried to write a program to trade the Pivot Magic Trading methodology.
Among the first obstacles we encountered was developing mathematical rules for an algorithm testing
signals for a preceding trend.

Since we are day trading, we demand only a minimal requirement to define a trend, 3 higher highs and
lows (Bull trend). Seems pretty straight forward, doesn't it?

All was well until we started to expand the formulae to include things that would be considered as having
violated/nullifying the trend. We all agreed one particular parameter:
Any time Price Action dips below the low of the trending candle before the last candle
counted for the trend (in a trend of 3, that means the 2nd trending candle), the trend
count must start over with the violating candle.

Now the fun started! What about an instantaneous Dragonfly tail flicking down
desperately? And what if the violator closes with a much higher high?

As it turned out, this was only one set of the many discretionary problems, easily resolved by the human
eye and human judgment (What about Volume? What about other Vital Signs? etc.?), but simply too
complex to program.

If you will look at the Overnight (bottom left upper chart), you will note that around 9:00 we have the first candle of a trend, subsequently violated by no
less than 4 candles before continuing north to reverse through the S1. Tough call, but sadly we had to let it go for lack of preceding trend. Boo hoo!

2 = Here's a rather unique second chance to join the ongoing move. A "P" signal off the MA (See Pivot Magic Trading course book for discussion and examples
of acceptable "S" Second Chance signals). Price Action pulled far enough away from the MA that the red Bear Dragonfly is actually preceded by a trend.

A = Failed test of MA pulls us in, with the initial stop nicely advanced above the MA.

NOTE B: Again today, ABS is bloated, so, to avoid getting stopped out at every Price adjustment, we
consider expanding our Maximum Profit Giveback and stop placement spacings.

B = Large red candle. Per our stop rules, move the profit-locking stop above the high of the candle.

C = Giant red candle through the S2. Not only is this a 123 (We added contracts. Remember, so close to the LT SW Channel floor, per PMT rules, the S2 has
been demoted so no late entry is possible), but it also permits us to tighten our stop. Per PMT stop rules, move the profit-locking stop above the S2.

D = Black Volume Bar of Death (pink arrows), a symptom of Momentum exhaustion. Prepare to exit.

Surprise! DVS (blue arrow) drives a large red candle (red inverted [Bull] Dragonfly, another symptom of exhaustion) to tap (another sign of exhaustion) on
the LT SW Channel floor (aqua line). Per our rules, zip the profit-locking stop briskly down, above the high of the candle and prepare to exit.

As soon as the following candle pulls back from the aqua line we have and Exit Now! +/- 5.25 points

[SNIP]

4 = A 2-bar through the aqua line (semi-permeable S/R)/failed Third Time Through (TTT) completes, with a large white Bull Dragonfly kickoff (blue arrow).
Once 62% of the body of the red candle is retraced, aggressive entry technique is a real good choice. Initial stop advanced under the aqua line.

R = Breakaway gap, and a large white candle/failed test of MA. Per our rules, move the profit-locking stop under the MA.

S = Large white candle through the S2. Move the profit-locking stop under the S2.

T = If you didn't expand the stop placement spacing (See NOTE B: above) you were now stopped out and left sobbing, as the Bulls continued without you.
Otherwise, our position is now in serious violation of the Pivot Magic Trading Maximum Profit Giveback rules. Jump mental stop to (expanded) Giveback
level.

V = A mid-air 123, and this large white candle returns our position to Maximum Profit Giveback violation. Mental stop at Giveback level.

The next candle (red spinning top) is a Higher-High-Turns-Red. It is not really sufficiently higher to scare us out - yet.

When the next candle completes a 2-bar "P" reversal, within range of the S1, we have an Exit Now! BRISKLY!!! +/- 6.50 points

We are too close to EOD Hiccup Danger Time to consider a reversal, so, thus ends our trading day.

[SNIP]

REMEMBER: Trade the Tape, Not my Prognostics!

Asher
=] ;-)>
Pivot Magic Trading Course
http://www.tradingthingys.com/PMTJ/Commodity%20Day%20Trading.html

Wednesday's PMT Chart: