Jacobs Ladders is a pivot based trading system that provides perspective on high quality, profitable trade setups for day traders. The purpose of this blog is to educate day traders on this trading system and provide links to the levels on a daily basis. You may wish to bookmark this page.
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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.
In this weekly blog series, I will point out set ups that occurred during the past week that are illustrative example of how to use Jacobs Ladders for day trading. These examples have been tweeted out on our public twitter feed, you can follow along here @the_artofchart.
For more educational information, please see the previous introductory post introducing Jacobs Ladders day trading system which can be found here.
There were no dearth of opportunities to capture two rungs of price movement on any given day of last week. I tweeted several such teachable moves everyday and I will highlight some of them in this post also.
When established patterns don’t work
Here is a summary of patterns observed nine out of ten trading days using Jacobs Ladders when established patterns don’t work.
Monday Sept 25 opened as a normal day, pushing price almost to Level High and stalled. A short entry. But on days like this the test of OPG is normally a bounce worth at least 2 handles. At least a pause. However see what happened?
This Monday turned out to be that one of those days where historical patterns 1 & 2 above did not hold.
Along with price stall at at Level High/WP area , news about North Korea announcing their right to shoot down US jets suddenly popped up on news. And prices tanked. When a news related sell hits, price tends to drop through several levels at once and they tend to bounce hard.
Pattern 1 did not hold because the Open Level dropped like a brick, No reaction Level Low dropped straight through and Level 2 dropped straight through.
Pattern 2 did not hold either because adjacent levels Higher Low, Low 1 also did not give a reaction.
The speed of drop is the warning bell in such situations. When OPG level dropped on a big red candle, a safe approach is to not assume an automatic reaction and let price demonstrate support
So keep this picture in mind and let price demonstrate support against a level before attempting a long in such a situation. There will always be a level against which one can lean on but let price show support first.
A trader should be moving with the trend and ideally be short to begin with. There would be plenty of short entries just like shown on this chart. Since purpose of this discussion was to warn against levels breaking away from normal patterns I focused on the long side.
Now, some example of JacobsLadders levels from past week
As the chart shows, as soon as levels were published, OPG was a long set up demonstrating support moving two rungs up straight to High, then a break above a shallow back test to High 1, then back test high again then move to High 1, break above and back test High 1 as support and close at High 2. This is a full blown stealth trend up day.
This was also an example milking the max move with a runner.- take it off at a profit target but then put it back on when a level converts to support to catch another leg up. If you have a big picture of the market – like Stan calling higher prices once bears gave up 2504 as resistance – this approach is very helpful.
Another big move observed was on copper. It was also an example of getting the 2 rungs moves but also staying in the trade if needed if you had a strong reason to believe in the trade as called the previous day by Stan.
ZB Example -let price demonstrate support and get back in trade
This chart shows if price does not demonstrate support for trade, get out and get back in when it shows demonstrated support for the set up again
Higher Low was the first long entry set and OPG was the next opportunity. OPG showed clear support again giving a chance to get back in all the way to level High.