Midpoint pivots are the midpoint between any two pivots. Simply take the price levels of any two pivots, divide them by 2, and you get the midpoint pivot of those original two.
Wayne’s Pivots Pro offers a few ways of labeling these midpoint pivots, as there’s no standardized label for midpoint pivots.
By default, Wayne’s Pivots Pro will use H and L labels for midpoint pivots. Where midpoint pivots above the central pivot are labeled H#, referring to the H in High. Midpoint pivots labeled L# are below the central pivot, referring to the L in Low.
The M# prefixes all midpoint pivot switch the label M, and then from the bottom to the top of the pivot range numerically orders them starting from zero (0) up to the number of midpoint pivots drawn.
There's another M# prefix using ‘+’ and ‘-‘ symbols. Each midpoint pivot above the central pivot uses the ‘+’ label, and below uses the ‘-‘ label. For every sequential midpoint pivot, another ‘+’ or ‘-‘ symbol is added to the label. For example, the third midpoint pivot above and below the central pivot would be denoted as ‘M+++’and ‘M---’.
The area between any two pivots could be considered pivot zone.
When writing out pivot zones, the “Lower Pivot – Higher Pivot” format is used. Where the pivot with the lower price is labeled first, and then the pivot with the higher price is labeled second.
For example, when combining two zones for the Range Bias Strategy, it uses the pivot zones H1 - R1, and S1 - L1.
When price is trading in the current period’s pivot, Wayne’s Pivots will display the Next Period’s Pivots in the future on the right. All the price data from the current period will be used by the indicator to forecast where the next period’s pivots will print.
As price gets closer to the end of the current period, the next period’s pivots move less. Becoming more accurate.
We use this to inform us of where pivot entry and profit zones will generally end up ahead of time. Letting you plan for trades in the future much more easily according to your bias.
Combining different pivot zones, we can create a strategy where we entry in one zone and exit in another. In Wayne’s Pivots Pro there are preconfigured entry and exit zones for bullish and bearish trading strategies.
There are two conditions that must be met in order to select the best strategy.
You are bullish or bearish if you have a directional bias, and you can change the strategic approach based on how much volatility you expect to occur in the market.
There are bullish and bearish versions of Biased Pivot Strategies catered to high and low volatility trading environments.
A useful feature of these strategies on top of the entry and exit pivot zones is that a stop loss level is also provided if you are wrong. This allows for simple risk/reward calculations for all the strategies provided.
There are four basic ways the current set of pivot points can be categorized as conditions relative to the prior set of pivot points:
Wayne's Pivots Pro will display each icon in the descriptions above when a Pivot Condition is met. This helps keep pivot point traders completely aware of how the current pivot point is performing relative to the prior one at a glance.
There are four types of biased pivot strategies, each has a bullish and bearish variant. Each section will have a description of the strategy, and then go over the pivot zones for the bullish and bearish cases.
The four biased pivot strategies are:
The Delta setup is used when you have a directional bias on an asset.
This setup borrows its name from the measure in options contracts to measure the change in the underlying asset in relation to the derivative.
Entry: L1 - CP
Profit: H2 - R2
Entry: CP - H1
Profit: S2 - L2
The Range setup is used when you have a weak directional bias on an asset, or a period of lower or average volatility.
It is the most common setup of all the strategies. There are more Range trade opportunities than any other setup.
Entry: S1 - L1
Profit: H1 - R1
Entry: H1 - R1
Profit: S1 - L1
The Continuation setup is used when stronger momentum from the prior period is expected to continue into the next. Calling for a more aggressive pivot entry zone.
Entry: CP - H1
Profit: H2 - R2
Entry: L1 - CP
Profit: S2 - L2
The Extension setup is used when you have a strong directional bias on an asset, and you anticipate high volatility in the same direction as the bias for the period.
Entry: L1 - H1
Profit: H3 - R3
Entry: L1 - H1
Profit: L3 - R3
Trade entries using the Delta and Continuation strategies can be transitioned into an Extension trade, because an Extension trade's entry zone covers the entry zones of both the Delta and Continuation strategies. If an Extension trade is identified, e.g. higher volatility and momentum is realized; then Delta and Continuation trades can be converted into Extension trades simply by targeting a higher pivot profit zone.
Counter-trend trades mean using a Biased Pivot Strategy in reverse: entering the trade at the profit zone, and exiting the trade at the entry zone. It is the riskiest of all the advanced setups, because it is highly dependent on timing.
While not much, there is a rule of thumb for identifying counter-trend setups: if you hit the pivot profit zone for a strategy early, as in before the first half of the pivot's period is finished, then a counter-trend opportunity could exist.
Compressed pivots are created when the prior trading period experiences low volatility, and the current R3 pivot is lower and S3 pivot is higher than the R3 and S3 pivot points from the prior period.
This exposes price in the trading period to reach prices past H2 and L2 more easily. Especially if there are any known volatile economic events planned for that period. Reaching or going past R3 and S3 is also far more likely when we get compressed pivots alongside volatile events.
Expanded Pivots are created when the prior trading period experiences high volatility, the current R3 is higher and S3 is lower than the R3 and S3 pivot points from the prior period.
When volatility continues to expand and momentum is strong going into an expanded pivot can lead to a higher likelihood of bigger P/L swings. Though, those conditions seem to be the exception.
Most expanded pivots do not see continued rising volatility and strong momentum. This makes reaching pivot zones to trade a strategy less likely. Reaching pivots past R1 and S1 can especially become less likely to reach.
Targets must be reduced, and possibly smaller timeframe pivots, in order to trade Biased Pivot Strategies.
Stacked Pivots refers to applying 2 or more copies of Wayne's Pivots Pro to your charts that use different timeframes, and then applying strategies to each one.
Pivots are "Stacked" when entry zone from the lower timeframe pivots line up with the entry zone of the higher timeframe pivots.
Stacked Pivots have a "Hierarchy" where the highest timeframe pivot, and its strategy, should take priority in trade decisions over the shorter timeframe pivots.
For example, during the first and last week of a month, the monthly pivot point levels are typically more useful than the weekly or daily pivot point levels. Hence, the monthly pivot points have Hierarchy control.
However, during the middle of a month, the weekly pivots can be especially useful for managing the trade's risk due to the responsiveness it has relative to the static monthly pivot: using weekly pivots for adding positions, limit orders, and managing stop loss orders to manage the trade of a higher Hierarchy monthly pivot. The same dynamics apply for daily and weekly pivots, and so on.
Below is a 3x3 matrix for simple decision making on what strategy to use. The x-axis is the Strategy Bias to use. The y-axis is the Market Conditions you are interpreting.