Natural Movements and Pivotal Points: Jesse Livermore's Pivot Point System

In the intricate dance of stock trading, the ability to predict and understand market movements is a coveted skill. Jesse Livermore, one of the most renowned traders in history, devised a system that hinged on the principles of Natural Movements and Pivotal Points.

Livermore’s system is like a compass in the vast ocean of stock trading, guiding traders through the waves of price fluctuations with precision and foresight.

This system, rooted in keen observation and strategic analysis, provides traders with a comprehensive framework to decipher the market’s rhythm and make informed decisions.

The Art of Natural Movements

In the realm of stock trading, understanding the natural ebb and flow of prices is crucial. Jesse Livermore’s pivot point system, with its emphasis on Natural Movements and Pivotal Points, offers traders a structured approach to navigate these waters.

By delving deep into the interactions between pivotal points and the Natural Rally and Natural Reaction columns, traders can gain insights into potential trend transitions and make informed decisions.

1. Recording Prices: The Basics

• Upward Trend: Prices are recorded in black ink.
• Downward Trend: Prices are recorded in red ink.
• Other Columns: Prices in the remaining four columns are recorded in pencil.

2. Drawing Lines: The Significance

Before diving deep into the intricacies of Livermore’s system, it’s essential to grasp the foundational principles on which it stands. Recording prices accurately and consistently is the bedrock of any trading strategy. In Livermore’s pivot point system, the color of the ink and the specific column in which prices are recorded play a pivotal role in understanding market trends. By adhering to these basic recording guidelines, traders set the stage for more advanced analyses and predictions.

a. Upward Trend to Natural Reaction Transition

Draw red lines under the last recorded price in the Upward Trend column when starting to record in the Natural Reaction column. This is initiated on a reaction of approximately six points from the last Upward Trend price.

b. Natural Reaction to Natural Rally or Upward Trend Transition

Draw red lines under the last recorded price in the Natural Reaction column when transitioning to the Natural Rally or Upward Trend columns. This begins on a rally of approximately six points from the last Natural Reaction price.

c. Downward Trend to Natural Rally Transition

Draw black lines under the last recorded price in the Downward Trend column when transitioning to the Natural Rally column. This is initiated on a rally of approximately six points from the last Downward Trend price.

d. Natural Rally to Natural Reaction or Downward Trend Transition

Draw black lines under the last recorded price in the Natural Rally column when transitioning to the Natural Reaction or Downward Trend columns. This begins on a reaction of approximately six points from the last Natural Rally price.

3. Pivotal Points: The Cornerstones of Decision Making

Pivotal Points are crucial markers that guide traders in their decision-making process. When two Pivotal Points are reached, these records become invaluable in anticipating the next significant movement. These points are highlighted with double lines, either in red or black ink, to draw attention. They should be closely monitored, especially when prices are recorded near or at these points.

4. Key Price Recording

The same rules apply when recording the Key Price. However, the basis is twelve points instead of the six points used for individual stocks.

5. Explanatory Rules: Delving Deeper

These rules provide further clarity on the interactions between the Natural Rally and Natural Reaction columns and the pivotal points. They emphasize the importance of these points in determining transitions and analyzing trends.

Harnessing the Power of Natural Movements and Pivotal Points

In the intricate world of stock trading, understanding the interplay between Natural Movements and Pivotal Points is paramount. Jesse Livermore’s pivot point system offers a roadmap to navigate this complex landscape. By mastering the interactions between pivotal points and the Natural Rally and Natural Reaction columns, traders can anticipate market movements, ensuring they remain ahead of the curve.