Pivot of Pivot Reversal Strategy

The Pivot of Pivot Reversal Strategy indicator is a technical tool designed to identify significant market turning points by applying a secondary filtration layer to standard pivot levels. It aims to filter out market noise by detecting "pivots of pivots," where a central pivot is higher or lower than its surrounding pivot points, providing more robust reversal signals for traders.

Usage

The strategy uses two distinct types of levels to assist in market analysis:

• Standard Pivots: Represented by transparent lines, these indicate basic swing highs and swing lows based on the lookback settings.
• Pivot of Pivot (PoP) Levels: Represented by solid, non-transparent lines, these are the primary focus of the strategy. A bullish "Pivot of Pivot" occurs when a pivot low is preceded and followed by two higher pivot lows. Conversely, a bearish PoP occurs when a pivot high is surrounded by two lower pivot highs.

Traders can use these PoP levels as dynamic support and resistance zones or as specific entry triggers. The strategy executes a long entry when the price breaks above a PoP high and a short entry when the price breaks below a PoP low.

Details

This script builds upon the concept of significant pivot reversal by requiring a nested structure of price action. Instead of merely looking at individual bars, the script calculates standard pivots first. It then evaluates the relationship between the three most recent pivots.

A "Significant Pivot High" is confirmed only if the current pivot high is surrounded by two lower pivot highs within the lookback window. This hierarchical approach ensures that the strategy focuses on major structural shifts rather than minor intraday fluctuations. The inclusion of an ATR-based filter further refines the detection by ensuring price movements exceed a minimum volatility threshold.

Settings

• PP Left Bars: The number of bars to the left of the potential pivot point required for calculation.
• PP Right Bars: The number of bars to the right of the potential pivot point required for calculation.
• ATR Length: The lookback period used for the Average True Range calculation to determine volatility.
• ATR Mult: A multiplier applied to the ATR to define the minimum price distance required for a significant pivot.

FAQ

How do I access the Pivot of Pivot Reversal Strategy?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

What is the difference between the transparent and solid lines?

Transparent lines represent standard pivot levels based on the bar lookback, while solid lines represent the "Pivots of Pivots," which are more significant structural levels.

Can this strategy be used on any timeframe?

Yes, the strategy is mathematically adaptive; however, users should adjust the "PP Left Bars" and "PP Right Bars" settings to match the volatility and trend characteristics of their chosen timeframe.