Significance of Six-Point Movements: Delving into Jesse Livermore's Pivot Point System

Jesse Livermore’s pivot point system is renowned for its precision and effectiveness in the world of stock trading. At the heart of this system lies the significance of six-point movements, which play a pivotal role in determining when to transition between columns.

This article delves deep into the importance of these approximately six-point rallies or reactions and their implications for recording entries in the Natural Rally or Natural Reaction columns.

Six-point movements in Livermore’s system are like the compass of a ship, guiding traders through the vast ocean of stock market intricacies, ensuring they never lose their way.

1. The Basics of Recording

In the intricate dance of stock trading, every movement and every point can make a significant difference. Among these, the six-point movements stand out as a beacon, guiding traders through the tumultuous waves of the stock market. Jesse Livermore’s pivot point system, with its emphasis on these specific movements, offers traders a structured and methodical approach.

By understanding the nuances of these six-point rallies or reactions, traders can make informed decisions, ensuring they are always in step with the market’s rhythm.

1.1 Upward Trend Column

• Record prices in black ink.

1.2 Downward Trend Column

• Record prices in red ink.

1.3 Other Columns

• Record prices in the other four columns using a pencil.

2. The Role of Drawing Lines

Drawing lines, especially those of specific colors, is integral to the system. They serve as markers, guiding the trader on when to transition between columns based on price movements.

2.1 Transitioning to Natural Reaction Column

• Draw red lines under the last recorded price in the Upward Trend column when you start recording in the Natural Reaction column. This begins on the first reaction of approximately six points from the last Upward Trend column price.

2.2 Transitioning to Natural Rally or Upward Trend Column

• Draw red lines under the last price in the Natural Reaction column when starting in the Natural Rally or Upward Trend column. This is initiated on the first rally of approximately six points from the last Natural Reaction column price.

2.3 Transitioning to Natural Rally Column from Downward Trend

• Draw black lines under the last price in the Downward Trend column when transitioning to the Natural Rally column. This starts on the first rally of approximately six points from the last Downward Trend column price.

2.4 Transitioning to Natural Reaction or Downward Trend Column from Natural Rally

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

3. Pivotal Points: The Heart of the System

Two pivotal points emerge from the above transitions, which are crucial in forming opinions about the market’s future movements. Depending on how prices are recorded when the market approaches these points, traders can discern whether the positive trend will resume or if the movement has concluded.

4. The Key Price: A Special Mention

While the system predominantly uses six points as a basis for individual stocks, the Key Price employs a twelve-point basis. This distinction is essential for traders to remember, as it can significantly impact their decision-making process.

5. Explanatory Rules and Their Importance

The system also incorporates specific explanatory rules that further refine the process of recording in the Natural Rally or Natural Reaction columns based on six-point movements. These rules ensure that traders have a clear roadmap to follow, minimizing errors and maximizing potential profits.

The Power of Six-Point Movements

In Jesse Livermore’s pivot point system, the significance of six-point movements cannot be overstated. These movements, whether they are rallies or reactions, serve as clear indicators for traders, guiding them on when to transition between columns and how to interpret the market’s potential future movements.

By understanding and effectively leveraging these six-point movements, traders can navigate the stock market with increased confidence and precision.