The Intricacies of Power Points
Ladies and Gents,I have been in the Futures Industry for 30+ years; 24 of those years as a self-employed trader/speculator/consultant. I have used these Power Points for the past 20 years. Power Points by definition is a mathematical formula that produces support and resistance levels for all markets. I have day-traders who subscribe to my service strictly for these Power Points. Learning the Intricacies will increase your probability of making money on a daily basis.
Please remember, these are SCALPING POINTS only. Occasionally, these points will produce a High Probability Trade. When one of these trades materializes, you do not fade it. It is better to not trade than fade the Intricacies of the Power Points.
The examples below are everything I know about Power Points and their Intricacies. The Power Points in all my examples are S&P Points, which are listed here.
| 8R | 1050.25 |
| 7R | 1010.25 |
| 6R | 980.00 |
| 5R | 955.75 |
| 4R | 937.50 |
| 3R | 923.75 |
| 2R | 913.50 |
| 1R 1st Resistance | 905.75 |
| PIVOT | 900.00 |
| 1S 1st Support | 896.75 |
| 2S | 892.25 |
| 3S | 886.50 |
| 4S | 878.50 |
| 5S | 868.00 |
| 6S | 854.00 |
| 7S | 836.50 |
| 8R | 816.50 |
The Pivot
Based upon the previous days high, low and close, Power Points produces a Pivot (900.00). The Pivot should be treated like any other number. If the market is breaking towards the Pivot it is support. If the market is rallying up to the Pivot, it is resistance. When the market breaks or rallies through the Pivot, I like to trade with the momentum for a quick scalp. More times than not, when the market goes through the Pivot, it will trade to the 1R (1st Resistance) or 1S (1st Support). Out of the eight Support and eight Resistance Points I produce, the Pivot is the hi-lighted number in the middle of them all.The Points
No matter where the market opens, the Point above is resistance and the Point below is support. For example, the S&P market opens higher at 910.00. The 1R at 905.75 is now support and the 2R at 913.50 is now resistance. Flash forward; the market now trades up 920.00. The 2R at 913.50 is now support and the 3R at 923.75 is now resistance.
The Mid-Points are Points
When the Points begin to get wide…i.e…5.00 or more handles in the S&P’s, the Mid-Points become Points. An example of a Mid-Point would be the Pivot is 900.00. 1R is 905.75. The Mid-Point is 902.87. Another Mid-Point would be 1R 905.75. 2R is 913.50. The Mid-Point is 909.62. Like all other Power Points, the Mid-Points are for scalping purposes only.The High Probability Trade
The High Probability Trade occurs on average a couple times a month. This trade takes Power Points the scalping tool and transforms it into Power Points a longer term, high probability tool. I look for this trade everyday. You do not fade this trade. It is better not to trade than fade the High Probability Trade.Example 1 Bullish Trade 1st Support Point (1S)
By definition, if the intraday low is the 1st Support Point (896.75), there is a Bullish High Probability Trade in the making. Any trade back above the Pivot (900.00) confirms this bullish trade is on. When the market trades above the Pivot, you initiate a bullish trade. There is now a;75% Probability of 905.75 the 1R
50% Probability of 913.50 the 2R
25% Probability of 923.75 the 3R
10% Probability of 937.50 the 4R
I recommend taking half your profits at the 1R Point and taking the balance of the trade off at the 2R Point. If the 1R and 2R Points are achieved within the 1st hour of the trade being initiated, there is a high probability for trade up to the 3R and 4R Points later in the day. After initiating this trade, your STOP should be placed below the 1st Support Point. After you begin to take profits your stop should be moved to above your entry level.
Example 2 Bearish Trade 1st Resistance Point (1R)
By definition, if the intraday high is the 1st Resistance Point (905.80), there is a Bearish High Probability Trade in the making. Any trade back below the Pivot (900.00) confirms this bearish trade is on. When the market trades below the Pivot, you initiate a bearish trade. There is now a;75% Probability of 896.75 the 1S
50% Probability of 892.25 the 2S
25% Probability of 886.50 the 3S
10% Probability of 878.50 the 4S
I recommend taking half your profits at the 1S Point and taking the balance of the trade off at the 2S Point. If the 1S and 2S Points are achieved within the 1st hour of the trade being initiated, there is a high probability for trade down to the 3S and 4S Points later in the day. After initiating this trade your STOP should be placed above the 1st Resistance Point. After you begin to take profits your stop should be moved below your entry level.
The Pivot Equilibrium Trade
This trade is all about a market which moved significantly in one direction; found support or resistance at or near a Power Point and then reverses course. When the market trades through the Pivot, you go with it. I tend to see this trade on days when an economic number creates a big move in the market.For example; let us say Retail Sales is bearish and the S&P trades down as low as 886.50 (3S). If the market turns around and trades back above the Pivot (900.00), there is a high probability this market will trade as high as 923.75 (3R). Equilibrium, the low is the 3rd Support Point. With trade above the Pivot, you initiate a bullish trade. Look for the market to trade up to the 3rd Resistance Point. Obviously, the opposite also applies where as the market trades higher first and then sells off.
I recommend taking 1/2 of your profits at the 1R Point and the balance of your profits at the 2R Point. Even though there is a very good chance this market will trade as high as the 3R, you will never go broke taking a profit. After initiating this trade your STOP should be placed below the 1S Point. After you begin to take profits your stop should be moved to above your entry level.
The Same Point 2 or More Days in a Row
I save all my points for up to 2 weeks so I can refer to them if need be. If you have the same Point 2 or more days in a row, the Point becomes even stronger. I like to look for this trade when a Point works in conjunction with a trend line, or a Fibonacci retracement level. What I like about this trade, you should see almost immediate results. This is a difficult trade to determine how much profit to take. I prefer to take the quick scalp, which is sometimes a big mistake. However you trade it, never ever turn a winner into a loser.Conclusion
In conclusion, if anyone needs more of an explanation of the Intricacies, please feel free to ask.Good luck.
Cheers,
TLP