We are introducing a new pivot system for day trading called Jacobs Ladders. This system identifies support and resistance for each trading day. The idea of the system is to identify when you are in a two sided day or a trend day and it helps identify the appropriate price levels to trade against given the current days price action. This is a short term trading system based on pivots. Each pivot is like a step in the price ladder that lets you go up or down the price.
The objective of the Jacobs Ladders is to help day traders identify and capture a minimum price movement between any two adjacent pivot points. This system, when used correctly, will improve the consistency of winning trades and helps minimize risk and losses.
JACOBS LADDERS PIVOT TABLES (UPDATED EVERY DAY AT 10.01 AM EST)
Intraday updates will be on the public twitter feed at @the_artofchart.
Links to Weekly Reviews:
How the System Works
The pivots in the system are published at 10:01am every day. There are 15 pivots per instrument. The idea of the system if to identify when the instrument is trending, when the instrument is not trending and to identify price levels to enter a trade. I recommend paper trading this system to see how it works before attempting to use it live. The idea of day trading is to enter one of the levels below when support or resistance is demonstrated and when the next level is reached, take 1/3 profit using the 3P method of managing a trade and set your stop to even. You may have your own system for managing risk, we suggest you take a small profit as soon as possible and then manage the rest as you see fit. See the example trades below for more information
If you day trade, one or two levels are not enough to minimize risk. A typical day’s worth of trading has many notches or pause/reaction areas. We see these as rungs in a price ladder. Using the ladder, you can keep losses small as exceeding the next ladder level will force an exit. It supports better entries as you will notice by watching the tape that price will tend to pause at the pivots identified.
It is recommended to take profits at the first ladder level exceeded after your entry and set your stop to even. The system is indented to help a day trader to make 4-5 handles in profit a day. Doing this consistently every day can be very profitable. Once you cross into the trend zone, day trading takes on a different character. On a trend day price will often move in one direction until the end of the day. This system helps to identify the price areas that are trendy, which for a day trader is handy to know so that you can manage entries and stops appropriately.
Focus on achieving an entire price move between two steps in the ladder. For example, most common move that can be captured is steps between Opening Price and Lower High or Higher Low. ES does not always go from Level High to Level Low. The price range could be 2 points or four points depending on a days range. For example, consider Friday,. Price did not fully touch the High, But there were three opportunities to go from Opening to Lower High .
A few notes on using the system that will come in handy:
1.On a two sided day, first touch of Lower High and Higher Low are high probability areas to take profits. Again taking 1/3 off and managing the trade using the 3P method is highly encouraged.
2. The Higher Low and Lower High areas are often used as support and resistance on trend days in the mornings. These are useful entry areas.
3. On a trend day, watch as levels are converted into support and resistance to evaluate the trade. As levels convert, the next rungs higher or lower become the next decision point. High and Low pivot points are often key determinants of a trendy day. Example, when ES is up-trending, it breaks above High level and often back tests it as support which gives an entry into the trend.
4. Extreme Low Level 1 is very often a reversal area and often gives a 10 handle bounce when trading ES. The reversal may come after hours or even next day, a a trader may want to leave a runner that has break even stop
5. Trading CL – watch the Inventory Reports on Tuesday and Wednesday as these provide extra volatility as this system provides for good risk management. A second touch of a a level that tests as support or resistance should be watched for a reaction.
Examples of Use
Links to Jacobs Ladders Pivots
We will be publishing new pivots at the links below each trading day at 10:01am. You may want to bookmark this page and refer back to it. We will also be introducing this new system on our subscriber Q&A webinar this month and be discussing it on our private twitter feed. There will be new posts about this trading system in this blog each week with trading examples of different instruments.
JACOBS LADDER PIVOT TABLES