Natural Movements in Jesse Livermore's Pivot Point System

Jesse Livermore, a legendary figure in the world of trading, developed a unique system to decode the intricacies of market movements. Central to his approach is the concept of “natural movements.” This article delves into what these movements signify and how they fit into Livermore’s broader pivot point system.

Natural movements in the market, as conceptualized by Livermore, are like the heartbeat of trading; they capture the market’s genuine pulse, free from external interferences.

1. Defining Natural Movements

In the context of Livermore’s system, natural movements refer to the inherent fluctuations in stock prices that occur due to market dynamics. These movements are not influenced by external factors or manipulations but are a result of the market’s organic reactions to various stimuli.

2. The Role of Natural Movements in Livermore’s System

Livermore’s pivot point system is built on the premise that understanding these natural movements can provide traders with insights into potential future market directions. By observing and recording these movements, traders can identify patterns and trends that may not be immediately apparent.

2.1 Natural Reactions and Rallies

Two primary components of natural movements in Livermore’s system are the Natural Reaction and Natural Rally columns. These columns help traders track the market’s ebb and flow:

• Natural Reaction: This captures the market’s pullback or decline after a rally. It’s an inherent part of the market cycle, indicating a temporary slowdown or reversal of an upward trend.
• Natural Rally: Conversely, this represents the market’s upward movement after a decline. It signifies a potential recovery or continuation of a downward trend.

3. Deciphering Market Strength with Natural Movements

Natural movements are more than just fluctuations; they offer a window into the market’s underlying strength or weakness. By observing the duration and magnitude of natural reactions and rallies, traders can gauge the market’s momentum and potential future direction.

3.1 Market Resilience

A prolonged natural rally, for instance, might indicate a strong market resilience and a potential shift towards a more bullish sentiment. On the other hand, extended natural reactions could suggest underlying market weaknesses.

4. The Art of Reading Natural Movements

Jesse Livermore’s pivot point system offers traders a structured way to interpret the market’s natural movements. While the concept might seem simple on the surface, mastering the art of reading these movements requires keen observation, patience, and practice. By understanding the nuances of natural reactions and rallies, traders can make more informed decisions and navigate the market’s ever-changing landscape with greater confidence.