yeah it's a funny old thing, pivots are hardly an objective reason to take a trade however if enough of the participants that matter are using them they can become self-fulfilling, the same goes for fibs in some respects. :smart:
With regards to using pivots as potential decision points for taking a trade:
Yes you do point to some nice reactions off them, and this is all well and good (and can be the basis of a profitable approach maybe?) but we still need to have an expectation to really make us stand out in terms of maximising the points available. So for example how do we know (to a high degree) how far price will move? In your examples 1 trade went 6 ticks and the other went 20, so at what point do we cut the trade for profit? What are we looking for as the give away signs?
Yes it maybe possible to just have simple rules like 4 tick targets, and one may be able to do quite nicely from this if the pivots are selected at the right areas.
But the point I think most are missing (not everybody ofcourse) is that it is indeed self-fulfilling. So that means you or I can logically work out that traders are trading at these pivots, so if they are, then I know where they get in, there for, I know roughly where their stops will be (expectation). All I need is to develop a way of determining when the pivot pouncers are no more then its time to knock them out of the game (thus taking your points against them).
We have already seen how there is a massive discrepancy in how far price moves off a pivot, and the fact is that most whom use the pivots are no way near experienced/skilled enough to know when to get out, ultimately been stopped out due to the transparent nature of their trading.
So yes, I'm saying you can be profitable playing a pivot bounce, but you need to be good at what you do, and you will never be able to take the move for what it is.
But I'm prodding others to consider a way to use the pivots to better effect.
In general, one would always want to be on the other side of those trading the self fulfilling prophecy, because they don't know why it works in the first place, so if they don't know why it works, they can never hope to learn where the price will go to or have a target (other than a guess).
I'm not knocking what you are saying BTW, just pointing out that there could be a more effective way to play in these scenarios.
Have a good weekend all.
