Pivot Point Reversal

Entry Logic

• Enter long on a bounce off a key pivot point level (S1, S2, or S3).
• Confirmation is a bullish candlestick pattern, such as a hammer or bullish engulfing bar.
• Use a 15-minute timeframe for this setup.
• Entry should be above the high of the confirmation candle.
• This setup works best in a ranging or moderately trending market.

Exit Logic

• The profit target is the next pivot point level up.
• Take full profits at the target.
• No trailing stop is used.
• Exit if price closes below the entry pivot point level.
• Exit on a confirmed bearish reversal at a resistance pivot point.
• Exit if the trade is not profitable within 4 hours.
• Exit if the RSI (14) drops below 50.

Stop Loss Structure

• Place a hard stop 1 ATR below the entry pivot point level.
• No soft stop is used.
• Maximum dollar loss is $400 per trade.
• Maximum percent loss is 0.8% of the account.
• The structural stop is below the low of the confirmation candle.

Risk Management Framework

• Risk 0.6% of the account per trade.
• Daily loss limit is 1.8% of the account.
• Weekly loss limit is 4% of the account.
• Maximum drawdown is 12%.
• Minimum risk-reward ratio is 1.5:1.

Position Sizing Model

• Use a fixed fractional sizing model.
• No volatility adjustment is needed.
• Use 2x size for A+ setups.
• Do not scale into trades.
• Do not scale out.

Trade Filtering

• Avoid trading this setup on very trendy stocks.
• Requires a clear bounce off a pivot point level.
• Trade only highly liquid instruments, such as forex and futures.
• Avoid trading this setup during major news releases.
• Do not trade in low-volume, choppy markets.

Context Framework

• The daily chart should show a ranging or moderately trending market.
• Price should be trading around the VWAP.
• The setup should occur at a previously tested pivot point level.
• The weekly chart should show a neutral bias.

Trade Management Rules

• Do not move the stop to breakeven.
• Take full profits at the target.
• Do not add to winning trades.
• This is a short-term, intraday trade.

Time Rules

• The optimal time to trade this setup is during the main session of the instrument.
• Avoid trading this setup in the last hour of the day.
• The trade should last for a few hours at most.

Setup Classification

• A+ setup: Clear bounce off a major pivot point, strong confirmation candle, high volume.
• A setup: Bounce off a minor pivot point, moderate confirmation candle, average volume.
• B setup: Weak bounce, no clear confirmation, low volume.
• C setup: No clear setup, avoid.

Market Selection Criteria

• Trade major forex pairs (EUR/USD, GBP/USD) and stock index futures (ES, NQ).
• The instrument should have a high level of liquidity.
• The instrument should respect pivot point levels.

Statistical Edge Metrics

• Expected win rate is 75%.
• Average win is 1.5R.
• Average loss is 1R.
• Profit factor is 1.125.
• Expectancy per trade is 0.125R.

Failure Conditions

• The strategy fails if the pivot point level is breached.
• A common failure is a false bounce followed by a continuation of the trend.

Psychological Rules

• Be disciplined in taking profits at the target.
• Do not get greedy and try to get more out of the trade.

Advanced Components

• Use a volume profile to identify high-volume nodes at pivot point levels.
• A market internals indicator can help gauge the strength of the bounce.
• Avoid trading this setup on correlated instruments.
• The 1-hour chart must confirm the reversal.

Location

• The setup is strongest when it forms at a confluence of a pivot point and another support level.
• The setup is weakest in a strong, one-directional trend.
• The location of the pivot point in the overall price structure is important.