Part of any trading plan is to have “decision levels.” These are price zones and references that are meaningful to the auction and present an opportunity for the trader to make a decision. We make decisions with respect to these prices, because we have an expectation that they will engage a “fight” for price between buyers and sellers.
The “decision levels” you see presented here are the “decision” levels we publish as part of the DAILY OUTLOOK that is sent to developing traders in our DEVELOPMENT PATHWAY. We build daily plans to give a framework for putting PATHWAY principles into action. One of the key takeaways of using profiling and volume analytical tools is that some prices are more meaningful to the auction than others. In Module 12 of our PATHWAY, we describe how to define “static” and “dynamic” decision levels. The levels you will see here are largely “static” with the exception of VWAPS, which migrate. Composite VPOCs also move, but less frequently than VWAPS.
For any given session, as part of my plan, I select 6 “decision levels” above the closing price and 6 below the closing price. I typically find at least 3 above or below that are within the expected range of the day as seen in the implied ranges generated by the underlying’s option inventory and pricing. These “decision levels” are not mathematically generated pivots. They are discretionary references seen in the auction inventory.