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Trading Emini S&P Futures With Pivot Points
Posted on February 9, 2010 by Chuck Kowalski
Pivot points are popular simply because a lot of traders use them. There are countless ways to trade pivot points with the emini S&P, but like to trade them as support and resistance points.
I normally only like to fade a move to a pivot when it is the first time it is touched during the day. I also tend to not take any trades at the open. Sometimes they work, but there is often a huge move that can blow right through the pivots.
In this example, I have circled 2 potential trades that I would take using pivot points. I use stops of 2-3 points depending on the volatility. I like to take at least 2-4 points out of every trade, also depending on volatility. I shoot for a bigger profit if I’m trading with a strong trend and I look for a quick exit if I’m trading against a strong trend.
The first trade was a nice buy setup at the pivot, which is usually the strongest pivot point. The market dropped 1.25 points below entry level and then had a strong rally. The R1 level was not a proper trade setup as it has been hit multiple times. The R2 pivot was the second setup that worked well. It did move 2.5 points above entry price, so a 3 point stop would have been necessary to avoid getting stopped.
I also trade off the weekly and monthly pivot points. They are more powerful setups on the initial hit than the daily pivots. The probabilities are higher for a winning trade if there are more than one pivot grouped together(daily, weekly,monthly) - usually within a point.
It is important to recognize what type of trading day might lie ahead. If the previous trading day was a narrow range day or an inside day, you might expect a breakout day the following day. Pivout can work on breakout trending days, but they can often get blown through. I tend to be real cautious trading pivots if I’m expecting a strong trending day.
Filed Under: My Trade Setups