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.
Jacobs Ladders provides a road map of a single day’s price movements for an instrument using a 15-point pivots system. Each pivot acts as support or resistance level that day traders can lean on to enter a trade, take profit, or for managing risk. This price map is valid starting 10 AM eastern. It helps a day trader understand when price is acting in a two-sided manner or price is trending. This helps the trader identify the appropriate price levels to trade against given the current day’s price action.
In this weekly blog series, I will point out set ups that occurred during the past week that are illustrative examples of how to use Jacobs Ladders for day trading. These examples have been tweeted out on our public Twitter feed, you can follow here: @the_artofchart.
For more educational information, please see the previous introductory post introducing Jacobs Ladders day trading system, which can be found here.
Jacobs Ladders Usage Example 1: Importance of the Daily Open
The examples below are intended to be educational in how to use the Jacobs Ladders Pivot System in day trading strategies. The first example has to do with finding where to “anchor” a day trade; this is often found at the opening level which is often support or resistance.
A trader can use the opening level as an anchor and go short or long as the case may be and take profit when price revisits the Higher Low or Lower High. These two price points are the first stepping stone before further move up or down.
Most days, it is very likely that Jacobs Ladders provides a two-price ladder move from the open. Remember a one-price ladder move is the minimum goal.
Such a two-steps ladder move typically results in four handles in ES or equivalent in other instruments, which is the daily goal.
1. Open to High or Open to Low – a two ladder move. See Sept 7 NQ chart below
Another example on ES Sept 8
Another example of capturing a two-ladder move occurred on September 7th. On September 7th, we had a tight range day which is often difficult to trade. But for a user of Jacobs Ladders, there are still two ladder moves worth to capture. Such days, you will see price moves repeatedly between just two levels. So a trader can enter the same trade multiple times and still capture two ladder rungs worth of movement. See chart and level below:
Example 2: Using Levels to Capture Trending Moves in Crude Oil and CL and ES
As a trader, noticing early when a day is trending changes is how I look at setups. The following examples look at how to trade a trending move and which level you need to pay attention to.
Low 1/Low 2 and High 1/High 2: One of these levels are highly likely he pause and reaction area for a trending move. If price has already reacted at Low 1 and subsequently broke below, usually Low 2 is highly likely pause/bounce area. Vice versa for High 1/ High 2 levels.
Extreme Low 1/2/3 and Extreme High 1/2/3. These are exhaustion areas of a move. All of these levels are highly likely pause and reaction area. A trader can typically lean on these levels to catch a move.
Here is an excellent annotated chart example from Tuesday on ES when it sold off all the way to Extreme Low 1 level.
The sell off started from Lower High in this case.
The Extreme Low 1 level often bounces 10 handles. If not by the closing bell, but in globex or the next day. On a bull trend, this level when touched has a high probability of bouncing. But repeated touches in subsequent days are often a sign of bear trend starting.
Crude Oil using CL on Friday Sept 8
Notice the CL sell off started when price clearly demonstrated resistance against the Open price level. Also note Extreme Low 1 and Extreme Low 2 demonstrated clear use as areas where one can try a long and then take off 1/3 and let the position run.
Check back with us in the coming weeks for more examples of using Jacobs Ladders. We will continue to make weekly educational posts here in the blog and also will be posting example trades on @the_artofchart.
Have a GREAT trading week!!