John Reese, editor of Validea, assesses stocks based on the known investing criteria of many of the ...
Spot Tradable Trends in Any Market
05/21/2012 3:40 pm EST
By using pivot points in conjunction with on-balance volume (OBV), trader John Person explains how it becomes easier to identify and confirm strong, tradable trends in virtually any market.
We’re here at the Traders Expo and we have a question from the audience for John Person of NationalFutures.com. Sir, what’s your question?
“My question is do the pivot points work with the volume on the daily charts, weekly charts, or monthly charts?
That’s good. So, John, how do you use pivot points with the on-balance volume (OBV)?
Pivot points are based on a mathematical calculation, and I’m sure on MoneyShow.com, there’s a lot that describes what pivots are, but basically, pivots give you a futuristic target.
The way I use them is by using a filtered moving average, which tells me what the condition of the trend is: bullish, bearish, or neutral. And under that condition, it tells me what the projected trading range will be.
Where we use on-balance volume is to give us an indication whether the underlying product that we’re tracking, if there is participation.
So let’s say the Person’s Pivot indicator says it’s in a bullish time frame and the price is rising, if on-balance volume is also rising in accordance to price, then you are confirmed that the market is in a significantly bullish trend.
Do you always want to see that confluence of those two things together before you’ll take a trade?
Well, there are a couple of things I look at.
I look for a set-up before I get into a trade. I look at the risk side of the trade, and what I use pivots for is for an exit strategy. It gives me an idea of where to take a profit.
Sometimes you see that market start to rally and if it’s not on a significant increase in volume, that will tell me that this trend is starting to run out of steam, so perhaps I need to lower my expectations for what my profit objective is.
That’s what a lot of traders struggle with is when to get out. They get into good trades, but they just don’t get out at the right time.
That has to be part of your trading plan before you even get started.
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