Pivots, Patterns, and Intraday Swing Trades: Derivatives Analysis with the E-mini and Russell Futures Contracts, + Website

CHAPTER 3

Pivot/Exhaustion Grid

The alternative title for this chapter might have been the more expected “Support and Resistance Levels.” Many traders and methodology vendors rely heavily on the price levels they place above and below the current market each day before the Open. “Watch this key number,” one will say. Or, “This number is a must-hold.” I've even heard chat room vendors of more questionable repute claim they can predict the high or low each day in advance, adding, “We never guess.” Drawn in by such claims, many a beginner trader then falsely assumes that knowing tomorrow's high or low in advance is actually the key to successful trading.

But this is simply not the case. In truth, an intraday day trader is only trying to capture a part of some of the many swings the volatile index futures make each day on their eventual journey to the day's destined high or low. An analyst's focus on some exact high or low only betrays his dangerous personal emphasis on being right. And the fundamental wisdom of all truly successful trading has nothing to do with being right. It has everything to do with executing entries when completed technical models appear at the right edge of one's video screen, whether some supposedly magic number has been reached yet or not.

The object of trading is to make a consistent profit. Using only numbers as decision criteria will never achieve this. Price levels of fairly precise support and resistance must be combined with waning momentum signals, ...