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.
I was out travelling the whole week so I was not able to make the usual daily tweets with charts that educates on Jacobs Ladders levels use. The usual minimum 2 rungs capture set ups were there everyday.
Use of Extreme Low Levels
I will use this week’s blog to highlight the the use of Extreme Low levels as illustrated by the Fed Day on Sept 20 on GC 6E and ES.
An important question about every trade set up is ‘what is the risk? What is the likelihood of getting my risk out with a profit to justify the trade? This is the most important question; how much of a price move can be captured.
Extreme levels (both Low 1/2/3 levels and High 1/2/3) are highly likely areas to give risk out on a trade while equally presenting opportunity to capture a nice price move.
An Extreme low level is a point of exhaustion in selling. Price then has a natural tendency to bounce to Low/ Low 1/ Low 2/ level. So either price has to bounce or it has to keep selling by converting the Extreme Low 1 level as resistance and move to next Extreme Low level below. So if price is not converted, it continues to be a long set up.
Let us look all three occurrences one by one.
ES Sept 20
ES tends to bounce on Extreme Low 1. It often bounces 10 handles by the next day’s sessions if not by the closing bell of same day.
If this level occurs after a gap of more than one week, such a bounce is usual. But if it occurs again within next 2-3 days, then it could be a continuation of selling.
GC is an example when the set up did give a bounce to level above.
Points to observe
2 PM EST candles sees GC test Low and pauses at Low 1 with a reaction bounce.
Then touch of Low 2 and reaction bounce.
Then Extreme Low touch and quickly bounce to Low 2 , capturing one rung – that is 4.5 handles or $450 on one contract.
Bounce stalls, price comes back to Extreme Low 1 and stops out the original long.
The levels’s objective is met here. It gives a clear and precise price point where a trader can attempt a long with ability to get risk out
6E Sept 20
6E does a lightning fast touch and reaction bounce to one level up from Extreme Low 1.
The second touch comes, which gives enough time to get an entry and take off 1/3 of a position reducing risk.
But the reaction is not strong. It comes backs and stops out and fails to sell further.
This gives another entry long, near the close of RTH. Price is hanging in there with a chance to exit the trade.
Overnight this trade continues to bounce to where price sold from.
Again,The levels’s objective is met here. It gives a clear and precise price point where a trader can attempt a long with ability to get risk out
In coming weeks I will be providing more examples of Extreme Low levels behavior from historical data on ES