Transitioning to Secondary Columns in Jesse Livermore's Pivotal Points System

Jesse Livermore’s Pivotal Points System is a renowned methodology for tracking and interpreting stock movements. One of the nuanced aspects of this system is the transition to secondary columns, which provides insights into shorter-term fluctuations that don’t necessarily align with the primary trend.

While primary trends paint the broader strokes of the market’s narrative, it’s the subtle shifts to secondary columns that capture the intricate details, revealing the market’s immediate sentiments.

This article will delve into the specific scenarios and price actions that result in recording in the Secondary Rally or Secondary Reaction columns instead of the Natural Rally or Natural Reaction columns.

1. Understanding the Basics of Recording

Before diving into the specifics of transitioning to secondary columns, it’s essential to grasp the foundational recording principles:

Recording Trends

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

2. The Role of Drawing Lines

Drawing lines in Livermore’s system signifies specific movements and transitions:

Upward and Downward Trends

• Red lines are drawn under the last recorded price in the Upward Trend column when transitioning to the Natural Reaction column.
• Black lines are drawn under the last recorded price in the Downward Trend column when transitioning to the Natural Rally column.

Natural Columns

• Red lines are drawn under the last recorded price in the Natural Reaction column when transitioning to the Natural Rally or Upward Trend columns.
• Black lines are drawn under the last recorded price in the Natural Rally column when transitioning to the Natural Reaction or Downward Trend columns.

3. Transitioning to Secondary Columns

The transition to secondary columns is a pivotal aspect of Livermore’s system, indicating shifts in stock movements that don’t align with the primary trend:

Secondary Rally Column

• If a rally occurs after recording in the Natural Reaction column, and it’s approximately six points from the last recorded figure, but doesn’t exceed the last price in the Natural Rally column, the price should be recorded in the Secondary Rally column. Recording continues here until a price exceeds the last figure in the Natural Rally column.

Secondary Reaction Column

• If a reaction occurs after recording in the Natural Rally column and it’s approximately six points, but the price isn’t lower than the last figure in the Natural Reaction column, the price should be entered in the Secondary Reaction column. Recording continues here until a price is lower than the last price in the Natural Reaction column.

4. Key Price Recording

The Key Price is a unique aspect of Livermore’s system: The same rules apply when recording the Key Price. However, the basis is twelve points instead of six points used for individual stocks.

5. The Importance of Pivotal Points

Pivotal Points are central to Livermore’s system, acting as markers for significant stock movements:

• The last price recorded in the Downward or Upward Trend columns becomes a Pivotal Point as soon as recording begins in the Natural Rally or Natural Reaction columns. After a rally or reaction ends, recording starts again in the reverse column, and the extreme price in the previous column becomes another Pivotal Point. These Pivotal Points are crucial for anticipating the next significant movement.

The Significance of Secondary Columns in Livermore’s System

Transitioning to secondary columns in Jesse Livermore’s Pivotal Points System provides traders and investors with a nuanced understanding of stock movements. By recognizing the conditions leading to entries in the secondary columns, one can gain insights into shorter-term fluctuations that might not align with the primary trend. This nuanced approach, combined with the emphasis on Pivotal Points, makes Livermore’s system an invaluable tool for those navigating the stock market.