Top Gun Pivot Indicator Rules and Strategy

Basic Pivot Information:

This graphic is a Top Gun Key Pivot. Key Pivot strategies are rather time sensitive, so they are accompanied by audio alarms when they appear.

This graphic is a Top Gun Pivot Indicator

There is a feature on the charts called Expansion Bands, they are brown dashed lines that create boundaries around price action. The Expansion Bands are used to determine when the Pivot Indicators are displayed. Additional uses of the Expansion Bands is detailed elsewhere on this site. The Expansion Bands are generated from the algorithms of the Top Gun System. The Top Gun System has the ability to "Breathe" with the market. This extraordinary feature of the system is responsible for the quality of all Top Gun indicators and signals. The math of these Expansion Bands is unique to Top Gun and the use of these Expansion Bands offers traders a keen insight to help interpret price action.

When price touches or exceeds an Expansion Band and mathematical conditions are correct a Pivot Indicator will paint in on the chart.

When conditions are correct one of the graphic indicators will appear on the chart at a point where a trade should be assessed for potential initiation of a pivot strategy.

Trade decisions can be made as price moves away from and returns back to the level the Pivot Indicator was triggered at. The price level where the actual pivot condition was met is indicated in the body of the price bar by a dark blue mark inside the bar.

When a pivot appears on the chart, the blue mark of the most recent pivot bar will extend to the price scale to help traders identify the price level of the actual pivot.

Note that is it possible for the pivot condition to be met prior to the close of the bar, when this occurs, the round Top Gun Pivot Indicator will mark the active bar as the bar continues to build.

When price action continues beyond the point where the pivot condition was satisfied and the dark blue mark was placed, this leaves a space between both markers. Certain trade conditions could be set up and traded from that space between the dark blue marker and the round pivot indicator.

There will be times when the Expansion Bands are violated by price action, but no pivot market is set. This is normal and no trades should be initiated. Pivot markers are only placed when mathematical conditions are met. Given the spread of the market, Top Gun will evaluate how much room there is for a profit back into the Top Gun Channel and more importantly the Red Line. This is done automatically and when there is sufficient room, the bar will be marked with a Top Gun logo target to indicate the pivot area

IF strategy conditions are met, trades can be initiated headed in either direction to, or away from the Pivot Indicator direction.

Reading the Top Gun Pivot Indicator Strategies page will reveal trading strategies for trading pivots as reversals back into the chart and as trend continuations which further expand the scope of the chart.

Trade EXPECTation should be for price to trade back to the Red Line of the Top Gun Channel, or breakout of the pivot area.

While the Red Line of the Top Gun Channel is an initial target location for the price when price action wants to return into the chart, there is a chance that price may move beyond the Red Line of the Top Gun Channel to produce an even greater gain for the trade. When that happens, this should be considered a "Brass Ring" gift rather than a normal EXPECTation.

When price action appears to want to break out of the pivot indicator in the direction of the trend, there is no target level traders can EXPECT to see. Price could merely pop out of the pivot and retrace, or at times the move could be just the beginning of a very large move in that direction.

Regardless of which direction price action takes, observing the price action as described on the strategies pages will help formulate a trade decision should any of the strategy conditions set up.

Risk:

In the pivot reversal trade, where the traders EXPECTS the price action to return into the chart, risk is set at a point where price goes against the position and is poised between the dark blue pivot bar mark and the round Pivot indicator at the end of the bar. Trading in that area is actually the criteria for the Trend Continuation trade and is very likely to violate the extreme of the bar that initiated the Pivot reversal trade. The trade should be closed if price action threatens this area.

More clearly stated do not let the trade go against the position any more than the distance to the end of the bar you used to initiate the trade with.

In the trend continuation trade, where the traders EXPECTS the price action to expand beyond the boundaries of the chart, risk is set at a point where price retraces toward the Top Gun Channel crosses and closes across the Red Line of the Top Gun Channel against the position.

Since the risk location is graphical and always known to the trader, it is absolute. The Top Gun system knows that the risk area is where the trade comes apart graphically and is not likely to recover from such a change in the chart pattern. As such, it behooves the trader to initiate each trade as close to that risk price level as possible.

With the price spread between the buy and the sell always a part of risk going into a trade, traders must mentally allow for this deficit in the account when opening a trade. Properly executed trade initiations, will be very close to the amount of spread plus a few pips.

Cautions:

If a previous trade has been indicated from one trade direction and could still be an active trade direction, a new trade in the opposite direction using a new Pivot Indicator CANNOT be considered until price has at a minimum crossed the Red Line in the Top Gun Channel and has closed against the original trade direction. Use of this price action indication is more to determine the slowing or turning of a trend rather than a trade initiation point.

Opening a trade before price action has indicated a true trend direction with respect to the Top Gun Channel Blue Line indicator would be a counter trend trade. While often successfully used as interim trades until price finds a trend they are typically short in nature and not as likely to enjoy much success until price levels are properly positioned with the Blue Line of the Top Gun Channel.

The Chart MUST display the Pivot Indicator BEFORE any pivot trades can be initiated.

In cases of multiple bars that display the Pivot Indicator, pivot reversal trade initiation must be calculated from the blue dot price level where the first bar to display the Pivot Indicator was actually triggered before initiating a counter trend pivot trade.

Because these indicators are GRAPHICAL they cannot account for irrational behavior imparted by fundamental news events. As such traders are advised NOT to initiate any trades in front of fundamental events with this method.

As is true with all trading, the introduction of "Fundamental" news events such as Government Reports and World Events will unrealistically skew the price action and negate most logic based "Technical" indicators. Care should be taken to avoid trading in front of these known events. The Top Gun system is logic based, as such once the news events create these irrational chart bars, Top Gun can then be put back to work assessing the potential to resume logical Top Gun trading strategies.

Despite our best efforts to filter out false positive indications using this Top Gun Pivot Indicator, as well as the potential for incorrect trader interpretations of price action, will sometimes lead to a small degree of incorrect trade directions, which could potentially lead to a trade loss.

Traders are advised to accept this as fact and deal with it by strictly adhering to risk exit rules. Pivot type trades by nature are indicating a point at which the market will turn. No system, or person can accurately determine this exact level, or whether price will stop and turn. Because of the dynamics of this pivot type of indicator, traders must always be aware that the market could potentially continue well beyond a pivot indication.

This knowledge is further indication that care should be taken to adhere to risk as an absolute exit. While the average positive indications of this Pivot Indicator significantly outweigh the false positives, as with all trading, the ability of the trader to interpret price action, accept losses and keep loss damage to a minimum is crucial when using a pivot type of indicator.

Advice:

When price levels coincide with Top Gun Range Numbers or GRAPHICAL indicators Pivot Indicator trades may be significantly enhanced.

Identifying Trend Direction

When there is price action that could potentially complete a Red Line, Blue Line Cross for the First time on a chart, that potential Compound Velocity could add a significant boost to the trade.

Prior to making any chart assessments, attention should also be paid as to the location of the Blue Line with respect to price action. As a general rule when price action is clearly below the Blue Line the propensity for the trade to sell off is significantly increased and typically will not change disposition until a natural bottoming type consolidation ends the downward move. Moves such as this are typically indicated by one of many Top Gun chart indicators or Range Numbers. Conversely the opposite can be said when price action is above the Blue Line there is a propensity for the trade to rally higher.

Once the chart displays a Blue Line trend direction it is best to trade in the trend direction. As such taking pivot trades against the established trend direction is not advised until the trend has indicated it has ended.

There are three significant indications that can be implied by the location of price relative to the Top Gun Channel.

• When price is below the Blue Line the chart is more preferable to initiate sell positions on the chart.
• When price is above the Blue Line the chart is more preferable to initiate buy positions on the chart.
• When price is commingled within the Top Gun Channel and the Blue line appears on the chart, seemingly from out of nowhere, but could possibly meet with price and cross the Red Line, the chart could be getting ready to start a trend when the Red and Blue Lines cross.

Identifying Trend Direction Changes

Depending on the duration and strength of the trend, the deterioration of the trend begins with price crossing back into the Top Gun Channel and closing on the opposite side of the Red Line against the trend direction. Further deterioration is indicated by price crossing and closing on the opposite side of the Top Gun channel against the trend direction. Until these conditions appear traders should consider the most recent trend to still be intact.

Pivot Trades With Traversing Crosses

Traversing Cross

When price moves from one side of the Top Gun Channel to the other, this is called a "Traversing Cross" or "T Cross in Top Gun shorthand.

Pivot Reversal Trade With Traversing Cross

Price action MUST be taken out of the Top Gun Channel with a Long Range Bar or a Series of Long Range Bars before attempting a reversal trade using a Top Gun Pivot Indicator.

As always recognition of the location of the Blue Line of the Top Gun Channel relative to price action is paramount. Trading against the trend direction or ignoring the potential Compound Velocity stored in a Red Blue Line Cross can be costly. Strictly adhere to the Blue Line location regarding trade direction.

While not always readily apparent, pivot trades typically begin when price moves from one side of the Top Gun Channel to the other. This is called a "Traversing Cross" or "T Cross in Top Gun shorthand.

Traversing Crosses for use with pivot reversal trades should NOT cross the Blue Line of the Top Gun Channel, as by design that would generate a Red Blue Line Cross giving the trade potential Compound Velocity in the direction of the Traversing Cross. Obviously, counterproductive if the trader is planning on trading back into the chart.

When the Traversing Cross involves the Blue Line of the Top Gun Channel, Trend Continuation Trades using the Top Gun Pivot Indicator should be considered instead.

Traversing Cross Price Action

Traversing the Top Gun Channel happens with many types of price actions. Price can cross with a series of normal size bars over a period of time and end with a bar that generates a Top Gun Pivot Indicator. Price might traverse the Top Gun Channel with one or more Long Range Bars triggering a Top Gun Pivot Indicator. Any combination of bars can qualify as long as price starts from opens and closes outside the Top Gun Channel traverses the Top Gun Channel and ends with a price bar that triggers a Top Gun Pivot indicator. Recognizing potential Traversing Crosses will significantly increase awareness to the potential of a pivot trade being set up.

A benchmark pivot trade begins with price traversing the Top Gun Channel with a Long Range Bar that penetrates the Expansion Bands and triggers a Top Gun Pivot Indicator. That first Long Range Bar is followed by a normal size bar that also penetrates the Expansion Bands and triggers a Top Gun Pivot Indicator. This condition leaves the trader with two nearby price levels with which to manage a trade entry. The two price levels are at the dark blue marks of those two pivot bars. At that point the pivot reversal trade can likely be opened at a price level somewhere between the two dark blue marks on the pivot bars.

See Pivot Reversal strategy for more detail.

Trend Continuation Trade With Traversing Cross

When the Traversing Cross involves the Blue Line of the Top Gun Channel, Only Trend Continuation Trades should be considered.

See Trend Continuation strategy for more detail.

Top Gun Pivot Indicator Strategies

Counter Trend Trades

Reversal trades are also called "Counter Trend Trades" and would expect price to move back into the chart from an expansion.

Pivot Reversal Trade Set Up

Set Up

After a wide move in one direction that causes the chart to trend... if a single Pivot violates the Expansion Bands with a Long Range Bar and stands alone as the obvious high or low ... especially when price reaches a known Top Gun hard Range Number area, such as support, resistance, or multiple Range Numbers of the same or similar value.

When this sets up it may be possible to trade a retracement of the last expansion by opening position in the opposite direction, which would take price back into the chart.

An aggressive entry would be to enter the position when price retreats away from the blue marker in the pivot bar.

Risk

Risk for this trade would be if price began trading back into the area between the blue marker of the pivot bar and the actual pivot indicator.

A second less risky or additional entry point would be AFTER price has confirmed a Red Line crossing. While this entry is safer, it may also be less energetic and could stall in that area for a period of time before making its way across the Top Gun Channel and out the opposite side.

This trade is further enhanced when the potential exists for a Red & Blue Line cross in favor of the trade direction.

Profit Targets

Profit for this type of trade should be based on price action. The most reliable exit is when price migrates back into the Top Gun Channel and crosses the Red Line against the trade direction signifying a disposition change in the trade.

Double Pivot Reversal Trade

Set Up

Two Consecutive Top Gun Pivot Indicators paint in with Long Range Bars, one bar after the next. The second bar must be more expanded away from the Top Gun Channel than the first to qualify the set up.

These two bars must exceed the Expansion Bands and both clearly cross to the outside of the Expansion Band area. A powerful move like this will bring these bars to a point where the chart actually displays the Expansion Band crossing through the body of both Long Range Bars.

When this condition exists the Expansion Bands will also be visible passing out the right side of each of the two consecutive bars.

Trade Entry

IF the Open of the Next Bar has retraced away from the Pivot area back into the chart and has traded past the blue marker of the FIRST Pivot Bar, this set up indicates a reversal trade can be initiated with the intentions of crossing the Red Line and possibly passing through the entire Top Gun Channel to a point well on the opposite side of the chart.

Risk

Risk for this trade would be if price began trading back into the area between the blue marker of the pivot bar and the actual pivot indicator.

Profit Targets

Profit for this type of trade should be based on price action. This trade is opened based on the expectation of price crossing the Top Gun Channel and settling somewhere on the opposite side. The most reliable exit after price has passed through the Top Gun Channel is when price migrates back into the Top Gun Channel and crosses the Red Line against the trade direction signifying a disposition change in the trade.

Trend Continuations Using Top Gun Pivots

Trend Continuation Trades

A trend continuation trade is a trade that expands a current trend further in the same direction.

Trend Continuation From A Breakout Of A Pivot

Set Up

Chart is in a tight range and breaks out with a Long Range Bar marking the Bar with a Top Gun Pivot Indicator.

The breakout must move price into a new trading level. This can be certified by viewing the area to the left of the Long Range Bar.

If the area to the left of the Long Range Bar is completely clear of any price bars, indicating that there has not been any price action in this breakout area for the entire timeframe of the chart, the strategy is poised to be productive. Trend Continuation trades are initiated from the area between the blue mark of the pivot bar and the round Top Gun Pivot Indicator marker.

Implementation of Trend Continuation Strategy

To effectively implement the Trend Continuation Strategy from a breakout of the pivot area, observe the price action relative to the Top Gun Channel. This strategy requires the next bar after the Pivot Bar to trade away from the Red Line of the Top Gun Channel before a trade can be initiated.

Price Action

After the Pivot Bar has painted in, the price action of the Next bar must be carefully observed. During the building of the next bar, price action must trade away from the Red Line of the Top Gun Channel towards the Pivot Marker without violating the Red Line.

It is imperative price action does not violate the Red Line as this would tend to dissolve the effectiveness of the trade.

Conversely, trade probability is enhanced the further price remains away from the Red Line of the Top Gun Channel.

Trade Initiation

Once the set up of the trade is confirmed, look for price action to trade between the blue marker and the round Top Gun Pivot marker.

The Trend Continuation trade can be initiated in the existing trend direction as price moves away from the Red Line of the Top Gun Channel and passes through the dark blue pivot mark towards the Top Gun Pivot marker.

As a reminder, when conditions warrant the blue mark of the most recent pivot bar will extend to the price scale to help traders identify the price level of the actual pivot.

Establishing your position at a price level close to the same price level as the dark blue mark of the pivot bar will keep risk to a minimum.

Risk

Risk for this trade is a close against the trade direction on the opposite side of the dark blue pivot mark, which may also appear as a dark blue line running to the price scale at this point in the trade.

Profit Targets

Profit for this type of trade should be based on price action. The most reliable exit is when price migrates back into the Top Gun Channel and crosses the Red Line against the trade direction signifying a disposition change in the trade. The most productive exit would be on further expansion of the trade reaching to a "Top Gun Known" such as a Range Number or a chart scale line color change to Red indicating the most likely area of maximum expansion for the session.

Trend Continuation Trade From An Inside Bar

Set Up

Chart is in a tight range and breaks out with a Long Range Bar marking the Bar with a Top Gun Pivot Indicator.

The breakout must move price into a new trading level. This can be certified by viewing the area to the left of the Long Range Bar.

If the area to the left of the Long Range Bar is completely clear of any price bars, indicating that there has not been any price action in this breakout area for the entire timeframe of the chart, the strategy is poised to be productive.

Implementation of Trend Continuation Strategy

To effectively implement the Trend Continuation Strategy observe the price action relative to the Top Gun Channel. This strategy has a rather long set up pattern and requires two complete bars and the open of the next bar before a trade can be initiated.

After the Pivot Bar has painted in, the price action of the Next bar must be carefully observed. During the building of the next bar, price action must trade and remain in the area between the Top Gun Channel and the Expansion Bands without violating either.

When the bar has finished building the high and the low of the bar must show there was no violation of the Top Gun Channel or the Expansion Bands. From a chartist standpoint this creates what is called an "inside bar".

Price must behave in this very specific manner to effectively initiate trades in the trend direction.

Once the set up of the trade is confirmed, and an "Inside Bar" is certified we look for the Open of the Next bar to qualify the entry.

Next bar must Open within the range of the "Inside Bar". When the open of the next bar is confirmed, the Trend Continuation trade can be initiated in the existing trend direction as price moves away from the Red Line of the Top Gun Channel and towards the Top Gun Pivot marker.

Risk

Risk for this trade is a close against the trade direction on the opposite side of the Red Line.

Profit Targets

Profit for this type of trade should be based on price action. The most reliable exit is when price migrates back into the Top Gun Channel and crosses the Red Line against the trade direction signifying a disposition change in the trade. The most productive exit would be on further expansion of the trade reaching to a "Top Gun Known" such as a Range Number or a chart scale line color change to Red indicating the most likely area of maximum expansion for the session.