Hanging ten usually refers to a surfboarding maneuver, where the rider hangs all 10 toes off the front end of the board. I don’t claim to have any knowledge of surfing, but according to the online encyclopedia of surfing, it’s meant to be pretty tricky.
What I want to show you today is also about balance and pullback forces within a wave, but is so much simpler to pull off!
Quick trades for an easy 10 pips
There’s a lot to be said for riding long term market trends, picking up hundreds of points at a time … but many of us come to trading because we love facing down the markets and spotting opportunities for quick in-out opportunities to put a profit in our pockets.
10 pips a day may not sound like a lot, but there’s a lot of sense in being in and out of the market quickly – the less time your money’s on the table, the better. And this little daily trick takes advantage of the magnet-like pull that pivot points have on prices to pocket a little prize for those in the know.
If you’re not familiar with pivot points, here’s what you need to know …
Pivot points are 5 or 7 (depending on how far you want to take it) lines drawn on a price chart each morning.
They are based on what the prices did the day before, and they give us some great clues about how prices will behave over the coming day – like how far the price is likely to run, where it’s like to hit support or resistance. This kind of knowledge is gold-dust if it’s applied correctly.
Not so long ago, you’d have to calculate the pivot point levels for yourself, and then plot them on the chart (I still have a pivot point calculator you can download on the website – but honestly, this seems a pretty old-fashioned way of doing stuff now.) Instead, you can just click a button on your charting platform, and all the lines will be drawn for you …
The seven lines are:
- the central pivot point – the price is often drawn to this key level after the market opens.
- Resistance 1, 2 & 3: these are key areas of resistance, where the price is likely to hit some congestion.
- Support 1, 2 & 3: similarly, these are three key areas of support. When the price nears these, we can expect to see congestion.
You can see on the chart above, that the price opened above the central pivot point (this is a bullish sign for the day’s trading). It then quickly moves up to Resistance 1. After a few attempts to push through this level, it eventually breaks through and reaches Resistance 2, bouncing back off this level.
It’s worth remembering that – as with most levels of support and resistance – pivot points aren’t about fixed price points where the market will neatly bounce. These are levels that are littered with the orders of other traders, which means that prices get drawn into them, and often bounce around them, in a generally messy display of behavior, before retracing, or moving on.
So, that’s your pivot point 101 … let’s get onto the nitty gritty of how we’ll make our 10 pips
First off, let’s get our pivot points set up on a chart.
If you’re using Core Spreads, it’s just a couple of clicks.
Here, I’m on a EURUSD chart, and click ‘Studies’, then select ‘Pivot Points’ from the drop-down menu …
I want to use ‘Standard’ pivot points, select ‘Shading’ and turn Resistance 3 and Support 3 to white (as I won’t be using these – I find that if the market has moved this far, something stronger than pivot points is driving prices, so they are of little use).
Once these settings are on my chart, I’ll select a 10 minute timeframe, and it’ll look something like this …
Something you’ll notice when watching pivot points is that some days the price doesn’t break beyond R1 and S1 – just moving in the narrow bands either side of the central pivot point.
However, when the price does break R1 or S1, it very often pulls back to that line. And this is where we take our crucial 10 pips.
We’ll wait for a 10 pip move beyond R1 or S1, then place our bet that the price will retrace back to R1 or S1.
Like this move from earlier in the week …
The way we do this (without having to watch charts all day) is to set up two orders on your account each morning, which will buy if the price hits 10 pips below S1 or sell if the price hits 10 pips above R1.
In the example above, this would mean two orders:
Buy at 1.0535
Sell at 1.0600
The profit target is 10 pips away (back at R1 or S1), and the stop level is tucked out of the way at R2 and S2.
Come the end of the day, if an order hasn’t been triggered, it can just be cancelled.
Here’s how a series of set-ups look over the course of a week …
That makes three winners, one no-trade day, and one loser. There would be some sense to adding a couple of points to your stop level, beyond R2 or S2, however this increases the risk profile, and in situations where R2 and S2 are very wide, you may feel this is just too big a risk to take for a 10-pip profit.
You’ll notice that I’m using this on EURUSD – there’s no reason you can’t apply it to other markets, but bear in mind that the average daily ranges vary enormously across different markets, so you may find that 10 pips is too large or too small – but if you start scalping for very small pip numbers, do watch out for the cost of the spread eating into your profits.
So, that’s it – dead simple, set-and-forget, 10-pips trick. Let me know how you get on with it.
To enjoy more content and get it faster Follow @TradersBulletin
Financial spread bets are leveraged products, which means you could lose more than you deposit. You should ensure spread betting meets your investment objectives. Full risk warning.