Candlestick and Pivot Point Trading Triggers

12/01/2006 12:00 am EST

Focus:

John Person

Founder and President, John Person, Inc.

With lots of positive press for his first book A Complete Guide To Technical Trading Tactics, John Person has followed it up with Candlestick and Pivot Point Trading Triggers. In his first book, John gave traders a good introduction to both candlestick charts and pivot point analysis, two of my favorite technical tools. In this new book, he shows how these tools can be used to develop and define your own trading system.

In the first four chapters, John covers some of the important basics of trading, including: a discussion of the different markets with a brief synopsis of their pros and cons, how to develop an overall market view, basic oscillator analysis as well as the topics of divergence and convergence. John’s view on applying stochastics and the MACD to a variety of markets will help the beginning trader, but the more seasoned traders should also benefit. In chapters four and five, he discusses in detail how the pivot point numbers are calculated. Even though I have also been using them for many years, his discussion made me look at them in a different way. For example, he shows how to use the market direction number (a three-period simple moving average of the pivot points) to rate the market direction. The relationship of the close and the pivot point to the market direction number are used to rate the market trend as bullish, bearish, or neutral. This is something I am going to try. His Conditional Optimized Moving Average System ™ (COMAS) adds a second moving average which can give the trader a “crossover trigger” to enter the market as well as the ability to gauge the strength of the trend.

If this is not enough to pique your interest, John moves forward to review some of the candle reversal formations along with some very interesting statistics on how often these formations are observed at key turning points. The combination of the candle formations and pivot point analysis provides a well thought-out rationale for a trading system that could be applied to many different markets and time frames. If you have never used pivot point analysis you are in for a treat, I cannot tell you the number of times, especially on a weekly or monthly basis, where the pivot point numbers coincided with an actual high or low. Since the pivot values are hard numbers, they are less subject to interpretation then some indicators, and they would be a valuable addition to any existing trading method.

A full chapter has been devoted to risk management, which is an essential ingredient to any successful, long-term trading career. John also spends ample time showing you how the pivot points can be used to exit a trade, and his recommendation to scale out of a position is something I strongly advocate.

In case it was not already apparent, I thoroughly enjoyed this book, but doubt whether I have done it justice in this brief review. It was my pleasure meeting John at a recent Trader’s Expo and besides being an accomplished author, he is also a dynamic and polished speaker. If you have the opportunity I hope you will attend one of his presentations. This book has already given me some fresh ideas, and I am confident that after reading it, you will agree.

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