This is the sixth email in our series, "What the Signals Mean."
If you missed the previous five emails you can view them here:
The DecisionBar Trader's Pivots
The DecisionBar Trader's Pivots are a tool to help you manage Breakouts and Breakdowns. The Trader's Pivots indicate where the market is likely to encounter support or resistance once a Breakout or Breakdown occurs.
Don't confuse the DecisionBar Trader's Pivots with the Trader's Pivots which are included in some charting platforms. Traditional Trader's Pivots monitor key levels from the previous day's trading.
DecisionBar Trader's Pivots adjust to the interval you are trading and the sensitivity set by the user. They also base their calculations on a look-back period set by the user. 150 bars is the default, and I have found no reason to change this setting.
It's important to remember that DecisionBar is a trading tool. It gives you the information you need to make trading decisions, but you do the trading.
On this chart of EUR/CAD note the location of the Trader's Pivots (shown as blue, dashed lines). Following the Breakdown, the market moved immediately below the first Trader's Pivot, which was just below the broken Lower Pivot (1).
At this point the trader can assume that the market is likely to drop to the next area of support. If you look closely, you'll see that the next area of support is actually made up of two Traders Pivots occurring at almost the same price. You can assume this the market will find some pretty significant support at this level.
As you can see, the market did find support at this level (2), but a retest failed and the market continued to drop (3).
Of course there is more than one way to trade this chart. Assuming you entered short at "1," you might have exited at "2" and re-entered at "3," or you might have decided to hold at two and see whet would happened. There is no right or wrong. It's just about making decisions.
On this chart you'll notice that the Short Breakdown bar took the market blow the first Trader's Pivot, but significant support created by two more Trader's Pivot's was just below. The obvious move here is not to enter unless the second level of support is broken. Once that support level was broken, the market had nothing to hold it up.
Here is a trade you might have been "faked out" by. We expect the market to find support at the first Trader's Pivot, but support appears to break down at "1." If you are a chart reader, that "Hammer" Candlestick at "1" might give you pause, as a Hammer is a reversal pattern.
Putting it all Together
In this series I've tried to explain to you some of the signals generated by my DecisionBar Trading Software. What I hope you can see is that, taken individually, each signal is pretty straightforward, but taken as a whole, there is a lot to keep track of.
I created DecisionBar because I found that I couldn't consistently keep track of all the forces working on the market at any one time. I was losing too many trades, and making too many mistakes, just because I was overloaded with information.
DecisionBar is not a trading system, but it is an information management system. Instead of you having to keep track of everything all at once, DecisionBar keeps track of everything for you, and alerts you when there is something you need to pay attention to.
DecisionBar allows you easily to see the forces working on the market so you can make intelligent decisions and are not distracted by keeping track of too may variables.
That's why we get comments like this on a daily basis (from a subscriber that has been with us since 2008):
I am so used to using DecisionBar after all this time it would be hard to trade without it. Hope your holidays were great this year! G.G -- Columbia, TN
If you are ready to become a successful DecisionBar trader, there will never be a better time than right now to get my DecisionBar trading software.
For details and to sign-up, please visit our website at:
Les Schwartz and the Staff at DecisionBar Trading Software.