Forex Forum @ DailyFX - Share and discuss Trading Strategies

Stacked In Favor

All days are not equal when it comes to intraday trading e-mini futures. Some have a built-in edge of moving higher or lower based on pure statistical odds of probability. As anyone who understands stats well knows that it always plays out to perfection over any extended length of time.

Pivotal Probability

Let’s discuss two (of many) rather common market occurrences that have a greater than 50% probability of outcome in stock index markets. The first one is price action touching its daily pivot point value somewhere inside of the cash session period. Over the course of time, stock index markets touch their daily pivot point values roughly 70% of the time. That means seven out of ten, fourteen out of twenty sessions per given calendar month will at some point touch the daily pivot between opening and closing bells.

Most of those days where the pivot point is touched includes multiple hits. A few sessions, the obligatory pivot tap will mark session highs or lows. There are all manner of possible behavior included there… which negates using the pivot itself as a defined strategy with any edge on its own. However, there are certain situations which develop intraday that take this overall stat which creates some high-odds situations to trade. Sometimes that begins right off the opening bell, other times it sets up somewhere else inside the intraday session.

Regardless, any profession based on odds of probability and repeated pattern behavior would consider predictable occurrence at 70ish% to be unbelievable. How many professional card players will pass up ante-raise into a big pot when their hand is perceived to have that type of edge for winning?

Better Yet

There is an even higher-odds edge than that when it pertains to daily pivot point touches intraday. Inside a given calendar year, you can count the times on one hand with fingers to spare where two consecutive sessions fail to hit daily pivot point values. Which means on the sessions that follow a session where the daily pivot value was not touched, there is an extremely strong probability that the daily pivot will be hit inside this session. Many times we’ll see where the next day following an untouched pivot event opens for trading very near or right at the pivot value for this session. It fulfills that probability right off the bat, whereupon any edge then ceases to exist. But, every now & then there will be days following a no-hit pivot that trade well away from that value. Those are conditions where the daily pivot beckons like a tractor beam… and the later it gets in a day, the stronger that magnetic pull on price action becomes.

Grt. Joke