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I actively trade future contracts on the emini SP500. I pay

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for a service to give...
I actively trade future contracts on the emini SP500. I pay for a service to give me "support" and "resistance" zones (Service's website: http://www.tradersmarts.net/). Before the beginning of every trading day, this service calculates support and resistance zones using some methodology that I think uses a combination of the prior day's volatility along with fibonacci lines (I'm guessing here) and then e-mails me those calculations. I want to know: How does this service calculate these support and resistance zones and how can I calculate it myself? Here is a screenshot of the support and resistance zones as mapped to the S&P500 over the course of this past week. https://futures.io/attachments/222066 Here's text from the e-mail they send:
TS TradePlan for ES - Wednesday November 23, 2016
ES Execution/Target Zones:
SHORT RANGES:
2241.5 = SHORT RANGE #3
2212.5 SHORT RANGE #2
2206.75 - 2203.5 SHORT RANGE #1
LONG RANGES:
2197 - 2194 LONG RANGE #1
2184.75 - 2183.5 LONG RANGE #2
2163 - 2160 LONG RANGE #3
TraderSmarts Numbers for ES (Z)
2247.25, 2241.5, 2212.5, 2206.75, 2203.5, 2198.75, 2197, 2194, 2191, 2187.5, 2184.75, 2183.5, 2181, 2178.25, 2177, 2175.75, 2174.5, 2173.75, 2171, 2168.75, 2167.25, 2165.5, 2163, 2160, 2159, 2157.75, 2155, 2152.75, 2151.5, 2150.5, 2148.75, 2146.75, 2144, 2143.25, 2140.75, 2138, 2136.75, 2134.75, 2132.5, 2130.5, 2128, 2126.5, 2124.5, 2122, 2120.25, 2119.25, 2118.75, 2117.5, 2115, 2112, 2107, 2103.5, 2100.75, 2097.25, 2094.5, 2092.5, 2090, 2086.75, 2084.5, 2082.75, 2081.75, 2079.75, 2073.5, 2070.5, 2067.75, 2062.5, 2060, 2058.75, 2055, 2053.75, 2047, 2042.5, 2039.5, 2036.25, 2033, 2026.5, 2023.75, 2022.5, 2020, 2013.75, 2010, 1999.5, 1997.25, 1992.75, 1991.25, 1987.75, 1981.5, 1977.25, 1968.5, 1959.25, 1953.75, 1910
Submitted: 11 months ago.Category: Finance
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Answered in 1 hour by:
11/26/2016
Financial Professional: Rakhi Vasavada, Financial and Legal Consultant replied 11 months ago
Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 4,545
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Verified

Dear Friend,

Hello and welcome. Thank you for providing an opportunity to assist you.

After careful calculation, I observe that the Short Ranges and Long Ranges is noting but "Pivot" calculations. These ranges, short or long, on either side are calculated using the previous day's High, Low and Close Price.

A Pivot is calculated, above which, there are three ranges, which are long ranges. Below the Pivot, there are three numbers which are short ranges. If the stock trades above its Pivot, it will have upward bias and long ranges are used and if it trades below bias, it will have negative bias and short ranges are considered.

The Long ranges are known as Resistance 1, Resistance 2 and Resistance 3. The short ranges are Support 1, Support 2 and Support 3. These ranges are essentially "intraday" levels to be used on a given particular day.

Each day, these levels change. That is the reason you get the email daily with new ranges.

This is how they are calculated.

Pivot Point = (H + C + L) / 3
R3 = H + 2 x ( Pivot - L )
R2 = Pivot + ( R1 - S1 )
R1 = 2 x Pivot - L
S1 = 2 x Pivot - H
S2 = Pivot - ( R1 - S1 )
S3 = L - 2 x ( H - Pivot )
Where,
H - Previous Days High
L - Previous Days Low
C - Previous Days Close
R - Resistances Levels
S - Supports Levels

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

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Customer reply replied 11 months ago
These calculations do not seem correct. Please see below:(1) You stated that the “Pivot Point” = High + Close + Low / 3. According to Investing.com (http://www.investing.com/indices/us-spx-500-futures-historical-data ) , the High + Close + Low / 3 for Nov 22 = 2203 + 2191.75 +2200 / 3 = 2198.25. However, the e-mail shows the Pivot for the following day, Nov 23, to be 2198.75. Can you please explain the .5 difference? I know the e-mails are correct because the market "reacts" to these lines exactly to the tick.(2) Similarly, if I try to calculate the Pivot Point for a different day (Nov 22) by looking at the H + C + L for Nov 21, which is 2196.50+2178.75+2194/3 = 2189.75. But the service calculated 2194 as the Pivot (See email below), which is very different.ES Contract Notes: 2194 TS # is Pivot for Tuesday.ES Execution/Target Zones:
2241.5 Extreme Short
2206.75 - 2204.5 Highest Odds Short FTU
2198.75 - 2197 Range Short
2187.5 - 2184.75 Range Long
2163 - 2160 Highest Odds Long FTD
2134.75 - 2132.5 Extreme Long
Financial Professional: Rakhi Vasavada, Financial and Legal Consultant replied 11 months ago

Dear Friend,

Hello and welcome again.

The 0.5 difference is negligible. The reason is that even if you use 1 decimal or 2 decimal or no decimal by rounding the figure off, this negligible difference will occur.

Having said this, the difference can also occur if one calculates with spot prices or with continuous futures contract price.

Having spent over 15 years with the capital market industry, I am pretty sure that this is nothing but Pivots calculated with minor difference as explained above.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

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Customer reply replied 11 months ago
I understand the 0.5 difference may be negligible for the November 23rd Pivot, but when I use your formula for other days, there are significant differences. I am attaching an Excel sheet with the "Pivot" point that the e-mails provided me every day for November. I am also attaching the High, Low, Close from Investing.com. It doesn't seem like this pivot formula is the full answer to how these are calculated. If you could please explain the significant divergence, that would be helpful. It seems like this formula was correct 3 times out of the past 16 trading days.
Customer reply replied 11 months ago
To add: I know you said the difference may be because the e-mail may be using spot versus continuous prices. If you could please look at the sheet and tell me what the appropriate formula is and how to account for the divergence, I would appreciate it and rate accordingly.
Financial Professional: Rakhi Vasavada, Financial and Legal Consultant replied 11 months ago

Hello again.

Give me some time. I will certainly revert back.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Ask Your Own Finance Question
Customer reply replied 11 months ago
No problem. To add additional detail, I received a new e-mail today. The e-mail stated the Pivot Point for Monday is 2210.75. However, the H + C + L / 3 from Friday is = 2211.25 + 2211.25 + 2202.50 / 3 = 2208.333. (source for H C L is investing.com http://www.investing.com/indices/us-spx-500-futures-historical-data). Your formula seems close but would like to figure out precisely what the inputs are and how they are different from your formula. It must be a simple answer similar to your Pivot Point hypothesis because the market follows these lines +95% of the time meaning that other traders are following this same system- these e-mailed figures are highly accurate.
Financial Professional: Rakhi Vasavada, Financial and Legal Consultant replied 11 months ago

Dear Friend,

I checked and re-checked the excel sheet that you provided. I reach the following conclusion.

1. First, if data for most days matches with the formula I provided, I see no logic as to why they should not match for some days as pointed out by you. Difference or 0.50 or 1 point is acceptable but I see no reason (could not find any reason) that you should have such a wide difference of 12 points or 38 points in one instance.

2. I see this as point blank mistake in calculation.

3. I am sure that the figures would prove accurate on the days when there is no wide difference from the figures derived using the pivot formula that I gave you. On the days of wide difference, even the accuracy in the Markets will not be optimal like rest of the day.

4. Another chance I see, though again it cannot result in such a wide difference is the source of price that you are using. I observed the prices on Investing.com and Equis (Thompson Reutors) data that we subscribe, there is slight difference in the Closing price from these two sources. On some days, the Investing.com has provided the last tick as the Closing price. Actually these are not closing prices but just a last traded price, or the last tick. The Closing price is supposed to be "Settled" or "Settlement Price" arrived daily by using a weighted average formula on the prices of last 15 or 20 minutes. This can cause some variance, though not significant.

5. Apart from these, I just see no other reason as to why, just on say 2 to 3 days out of 15 the data will not match. If it is matching for rest of the day, it can be nothing more than a mistake on some front.

6. Therefore, I am sure that this is certainly the PIVOT and nothing else and that too generated from the formula that I provided. This methods is used by most of the data providers in the financial market industry.

I hope this helps.. Feel absolutely free to continue the conversation if you require.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Ask Your Own Finance Question
Customer reply replied 11 months ago
Hi Rakhi,I continued to search on my own for an answer and I came across an article written by the person who runs the TraderSmarts service: http://marketheist.com/product/tradersmarts-futures-trading-support-resistance-levels/. He states "They can be treated somewhat like Pivot Points only they work much better." Your initial hypothesis of these being Pivot Points is a close guess, but as we observed by trying your formula, this answer is not correct. As he stated, he is using some variation from the original Pivot Point formula. If we ignore the 38 and 12 point outlier data points on my Exvel Sheet, there's still significant variation from your original Pivot Point Formula. I can provide an Excel sheet later this week with more of his data points to give you a bigger sample if that helps reveal the true formula.
Financial Professional: Rakhi Vasavada, Financial and Legal Consultant replied 11 months ago

Sure, let me know.

I would not mind working out on that excel sheet as well.

However, I did not observe any significant difference after ignoring the 38 and 12 point outlier, apart from difference of 1 or 2 points.

However, you may keep the offer of additional service pending, but I would be obliged if you can accept the basic answer and provide positive rating as I can be compensated for the work done so far.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Ask Your Own Finance Question
Customer reply replied 11 months ago
Your original answer was close, but the divergence of 1-2 points is still significant: It is imperative that I be able to replicate this to the exact tick so I can trade my strategy accordingly. My trading strategy relies on scalping a fraction of a point at a time, so if the formula you provided is off by 1-2 full points, I cannot use it. Please let me know if you find the formula that can replicate this services emails exactly. I will be happy to rate after this is found. If you are unable to find the exact formula along with the source for the numbers within the formula, please let me know so I can assign the question to someone else. To assist, I provided the "Pivot Point" provided by the service for 3 weeks of October so you have a larger data set.
October 31 - 2124.5
Oct 28 - 2132.5
Oct 27 - 2134.75
Oct 26 - 2144
Oct 25 - 2144
Oct 24 - 2134.75
Oct 21 - 2134.75
Oct 20 - 2141
Oct 19 - 2126.5
Oct 18 - 2118.75
Oct 17 - 2126.5
Oct 14 - 2120.25
Oct 13 - 2132.5
Oct 12 - 2158.5
Oct 11 - 2158.5
Oct 10 - 2146.75
Oct 7 - 2152.75
Oct 6 - 2152.75
Customer reply replied 11 months ago
I wanted to follow up on whether you were able to make any progress on this? If you can't figure it out can you please assign it to someone who can? Thanks
Financial Professional: Rakhi Vasavada, Financial and Legal Consultant replied 11 months ago

Dear Friend,

Hello. Sorry for a delayed response. I worked on number of methods during these days and tried to tweak every available formula.

I am of the firm opinion that where the data does not matches, you will have to reach out to the email provider / sender pointing them out as "mistakes". I am calling them mistakes because, there is no valid reason as to why this should differ on some occasions when it matches for the 70% of the time. The email sender CANNOT be using two formulas.

Having said this, I am of the firm opinion that there is no such formula which the email sender must be using as the original method that I suggested is the only one which is NEAREST to the outcomes. So, only possibilities remain is that of "Mistakes" on the following day. With every other formula that I tried with, the difference would anyway will not be this big.

I would urge you NOT to accept the additional services that I offered. However, in the SAME breath, I would urge you to rate me positively so that I can be compensated for the time I spent on this if you think fit.

Warm Regards,

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