Secrets of a Pivot Boss Summary –

Value Area, VAP, POC, Pivot Points,

CPR by Frank ochoa
  Vamshi B
 September 12, 2021
 Courses

Table of Contents

 Candlesticks Basics:
 Important Market Reversal Candlesticks :
 Secrets of a Pivot Boss Summary – Value Area, VAP, POC, Pivot Points, CPR by
Frank ochoa
o Using Previous Day Information
 Volume at Price Information
 Point of Control
 The Value Area
 The Market Open Relation to Value and Range
 Entry Options:
o Entry Options in a Bullish Trend
o Entry Options in a Bearish Trend
 Value Area Overlap:
 Width of  Money Zone or VAH and VAL
 Virgin Money Zone
 VAP in Trending Markets:
 Standard and Extended Floor Pivots Formula
 Two-Day CPR Relationships
 Gap Trading
 References:

Candlesticks Basics:
The body of a candle is the portion of the candle that extends from the open price to
the closing price. White or green candles are used to indicate bullish sentiment when
the close price is higher than the open price (C > 0). Bearish  Candle forms when the
close price is  below the open price (C <O) which forms a black or red color candle
and it signifies a bearish sentiment.  The candle’s top and bottom indicate the high
and low prices of the bar in the chart. In cases where the high or low exceeds
candle’s body, there’s an wick called a “shadow” or “tail”.
The distance between the candle’s low and high is known as the range.

Candlesticks come in different shapes, sizes, and combinations.

Ability to quickly piece together the market’s response using this vital information
will be extremely beneficial to your trading success.

Important Market Reversal Candlesticks :

The reversal Candles Setup is one of the most visually compelling candlestick
patterns due to its long price tail, which helps to highlight major reversal
opportunities in the market. These factors can be easily overlooked, even though this
candle pattern is well-known and appears to be elementary. Considerations when
looking at reverse-wick candlesticks include: the candle’s body, the candle’s size in
relation to the body, and close percentage (the percentage of the candle’s price that
closes relative to its range).

1. The size of the reversal wick is determined by the size of the body.
2. Ideally, a wick should be 2.5 to 3.5 times larger than the body.
 3. It’s also important that the bar’s close falls within 35 percent of the candle’s
overall range for a bullish reversal wick.
4. The candle must close within 35 percent of the overall range of the candle in
order for it to have a bearish reversal wick.
5. paired with pivot points these reversal candles can be extremely helpful
6. On the basis of their placement in an overall trend, these candles are called
hammer, hanging man or dragonfly doji in traditional candlestick terminology.

Secrets of a Pivot Boss Summary – Value

Area, VAP, POC, Pivot Points, CPR by Frank
ochoa
Using Previous Day Information
Why do we want to use a prior day’s information for the following session? We all
know that the information is old news? But by understanding where the market
perceived value to be fairest in the prior session, we are able to use this information to
help us determine price valuation for the current session.

Volume at Price Information

Price-based, market-generated information is the sole source of information for the
Money Zone.

Volume on the other hand, can have a significant impact on the market’s conviction
and confidence.

If you’re looking for a similar indicator to Market Profile, try Volume at Price (VAP).
Like the Market Profile, the volume at price indicator divides volume equally across
all price points that were reached during a specific period of time and plots the
information using a horizontal histogram directly on the price chart. The information
display is actually quite attractive and allows you to quickly assess major points of
interest.
Using volume activity from a previous session, the VAP indicator overlays the
histogram over the current price to give a visual representation of the volume activity
at a particular price. On today’s chart, you can see the volume activity from yesterday
at a certain price. If you look at yesterday’s market, you’ll see that volume point of
control (VPOC) represents the fairest price as seen through the eyes of trading
volume. Histograms show VPOC as the longest horizontal line in the session.
When it comes to fair value for traders, both the volume point of control and price-
based POC identify the same price level. However, this is not always the case.

Point of Control
It’s important to remember that on any given day, a day’s point of control is where
the most trading activity occurred. Due to this, buyers and sellers agree that this
price is the most reasonable. Plotted on your charts is a point of control that
provides insight into the market’s valuation trends. VWAP(Volume Weighted Average
Price) can be used a a Point of Control indicator.

The Value Area

Traders will enter the market if they believe the price is over or undervalued. When it
comes down to it, responsive buying and initiative selling occur at a lower value than
responsive selling and initiative buying. Prices can be determined by looking at the
value area. For a given period of time, 70 percent of trading activity occurred in the
value area. Most trading activity took place within this range, establishing this area as
a zone that facilitates trade easily and efficiently. Whenever you move outside of this
range, you will trigger the actions of the participants who are receptive and initiative.

The outer limits of the value area serve as a sort of battleground between buyers and
sellers. Vendors who are responsive and buyers who take initiative hang out at the
VAH’s (Value Area Higher line) upper boundary. Market participants will look to start
investing as soon as the price moves above this zone. However, the bottom part of
the VAL’s (Value Area Lower Line) is where responsive buyers and initiative sellers will
be looking to invest their funds.

The Value Area is a range of prices where the majority of trading volume took place
on the prior trading day. In specific, this area is the range where 70% of the prior
day’s volume happened. The value area is approximately one standard deviation
above and below the average highest volume price. With this knowledge, there are
specific probabilities of market behavior we can understand to digest the value area.
The value area gives us an idea of where the smart money is playing ball and where
the institutions are guiding the market. From this data, we can derive intra-day
strategies that capitalize on market behavior.

The Market Open Relation to Value and

Range
The opening of the market can have a significant impact on the day’s outcome..
Specifically, the open in relation to range and value can help you predict potential
price behavior for the session.. Opening relationships can help you prepare for the
day’s trading activity by validating or invalidating your price forecast. Examples
include days where the opening price is at or near its value, as opposed to days
where it is at or below the prior day’s price range, which will result in a markedly
different conviction and result. Your ability to identify early market conviction will
depend on your ability to recognize the pattern of the day.

The Three Opening Relationships

1. In Range and In Value                                                                             

Acceptance/Rejection
2. In Range and Out of Value                                                                     
Acceptance/Rejection
3. Out of Range and Out of Value                                                             
Acceptance/Rejection
It’s important to keep in mind that value acceptance or rejection is part of every
relationship.

For example:

1. if you’re trading within the previous day’s price range and value area, you’re
opening a position in that range. A range and value open indicates that the
market sentiment from the previous day has not changed and that the market
is currently in balance. It means that the day’s risk and opportunity are low,
 which usually results in a quiet trading session. It is common for this type of
opening relationship to lead to a typical day, trading range day, or sideways
day.
2. An open that occurs outside of the prior day’s value area, but within the prior
day’s range, is the second type of opening relationship. Market sentiment has
changed slightly, which means there is more risk and opportunity with an
open in range but out of value. However, the market must break free of the
previous day’s range and accept new value in order for greater directionality
to be seen. An expanded typical day or a double-distribution trend day will
likely occur if this is detected. As long as the market does not break out of the
prior day’s range, Trading Range Day, or Sideways Day, will occur.
3. That leaves us with an opening that occurs outside of yesterday’s range and
value area. In such a case, the market has opened unbalanced, indicating that
the market’s mood has changed significantly from the previous day’s market
sentiment. That indicates the market is likely accepting new value and will
likely continue to extend as more initiative participants join in, if the market
does not fall back into the previous day’s trading range. A trend day, or a
double-distribution trend day, is usually the result of such a connection. It is
important to note, however, that if price returns to prior day’s range, this
indicates that market participants were able to push the price back to the
previous day’s value. This indicates that the breakout attempt was
unsuccessful. It’s possible that a Trend Day in the opposite direction will occur
if new value is strongly rejected.
 

Because 70% of the trading activity occurs in the value area each day, it is vital to
understand the value area’s importance. Buyers and sellers agreed that this was the
best place to do business, so the majority of the day’s transactions took place within
this range. When it comes to market-generated information, the ability to
understand the relationships between current and prior value areas is extremely
crucial. Contrary to other indicators, Money Zone levels from the previous day are
still very relevant in the marketplace for several days, if not weeks. This will help you
to better understand the current market behavior and future price movements.

Value area relationships allow you to gauge market strength and prepare for specific
types of setups during the day. When analyzing the current strength and direction of
the market, seven types of value area relationships should be considered: Higher
Value, Overlapping Higher Value, Lower Value, Overlapping Lower Value, Unchanged
Value, Outside Value, and Inside Value. The direction of each value area relationship
determines the expected outcome.

 
Entry Options:
For example, if there is a market opening, A gap above VAH indicates that the market
is ready to reverse its trend, so look to buy a pullback to the value area or the point
of control in anticipation of a bullish session. This will help you determine whether or
not the market is accepting or rejecting your predicted directional bias.

Entry Options in a Bullish Trend

Open Above Value                                                                                  Buy at VAH
and POC
Open Within Value                                                                                  Buy at POC
and VAL
Open Below Value                                                                                   Sell at VAL and
POC

Entry Options in a Bearish Trend

Open Below Value                                                                                     Sell at VAL
and POC
Open Within Value                                                                                    Sell at POC
and VAH
Open Above Value                                                                                   Buy at VAH
and POC

Value Area Overlap:

You have an Outside Value Relationship (OVR) whenever your current value area is
larger than your previous one. As a whole, buyers and sellers are satisfied with the
trade facilitation in this area, but the previous session widened the range of options
for better trade.

Inside Value relationship occurs when the current day’s value is completely absorbed
by the prior day’s value area, forming an Inside Value relationship. This relationship
usually indicates a low level of volatility before the current session. Instead of trading
within a range on an outside value day, the inside value day suggests that the market
was in balance, but is now poised for a big breakout.

Width of  Money Zone or VAH and VAL

The width of the Money Zone value area can be a big determining factor on price
movement if the range is  abnormally wide or narrow .

Narrow Zone formation is indication of a new breakout possibility and Wide is

indication of Sideways market.