What it measures

Two unrelated tools share the name. A swing pivot (pivot high, pivot low) is a bar whose high is higher than a set number of bars on each side of it: the local peaks and troughs that define market structure, trendlines and divergences. Floor-trader pivot points are support and resistance levels for today computed from yesterday's high, low and close. The screened strategies use swing pivots far more; they are the fourth most used calculation in the universe.

The calculation

Swing pivot:

pivot high at bar i if high[i] is greater than every high in the left bars before and the right bars after it

It can only be known right bars after it happened, which is the point most backtests get wrong.

Floor-trader pivots:

P = (high + low + close) / 3 of the prior period R1 = 2P − low; S1 = 2P − high; R2 = P + (high − low); S2 = P − (high − low)

Inputs and defaults

  • Left and right bars: 5 and 5 is common for swing pivots; larger values find larger swings.
  • Period: daily for floor pivots on intraday charts; weekly and monthly variants exist.

How it is read

Swing pivots define higher highs and lower lows, so they are the raw material of structure rules: a break above the last pivot high is a break of structure, a failure to make one is a change of character. Floor pivots are traded as levels: buy at S1 in an up day, fade at R1.

Where it fails

A swing pivot with right = 5 is confirmed five bars late, and a strategy that acts on the pivot's bar rather than on the confirmation bar is looking into the future; in a compiled backtest this shows up as impossibly good entries. Floor pivots carry nothing but arithmetic on yesterday's range, and work to the extent that other traders watch the same numbers.

How the desk reads it

The first thing the desk checks on a pivot-based strategy is whether entries wait for the pivot to be confirmed, because a pivot acted on before its right-side bars have closed is a look into the future and the backtest is invalid. After that, a structure rule is read on how its levels are defined in code.

In the desk's screen

Of the 614 screened strategies in the library, 94 (15.3%) use this indicator somewhere in their logic.

24 of those were gross-profitable on enough cells to reach the after-fee replay.

The count is read from the compiled code of each strategy in the library; a strategy that computes the indicator by hand under another name is not counted. The desk's own rules are not part of the count.