Pivot Points
Those of you who have been trading for a past will be familiar with Pivot Points. During the lesson I wished to go over how find a Pivot Point and also a vaguely different method of using them. First let’s look at how you calculate a Pivot Point.
Using a bar chart you will observe that each bar has an Open, High, Downcast and Close. This information represents all price activity during that proper period.
In the subsequent example, we shall use a daily bar. To calculate the pivot point all you need to do is encompass the High, Low and Close. Once this has been done you next divide the total by three, e. g. the cash FTSE on the 2nd May 02 had a Lanky of 5192. 70, a low of 5125. 50, and a close of 5174. 10. If you add the three together, you get 15492. 3. You then divide that total by three to get a Pivot Point of 5164. 10.
OK, so far so good, but what do you do with this poop? Well, one modus operandi that I like to use intra day is to use the rotate point as a trend indicator. We begun know that the Pivot Point for the 2nd May was 5164. 10 and we will use this the next day as an intra day trend indicator.
If the price is above 5164. 10, then I would only be long and if it were unbefitting 5164. 10, I would only be short.
As price can fluctuate around any given point I again add a further proviso. If I have support close to 5164. 10, I will first wait for the price to pass through 5164. 10 and prop before entering short. If I have resistance close to 5164. 10, I will first wait for the price to move through the Pivot Point and resistance before entering long.
This line becomes even more powerful when the Pivot Point is close to the opening price. If, for case history, the opening price is 5174. 10, the Pivot Point is 5164. 10, and I eventually go short at 5155, I can stay short the whole day as long as it does not go above the Pivot Point.
One time in a position I normally have a very tense stop to begin with and then will chase the market with a trailing stop to catch in profits.
Another way I like to add Pivot Points to my analysis is for more long - expression projections. I will use the Pivot Point of a Yearly, Calendar and Weekly chart. In this situation it would be the Eminent, Low and Stuffy of the previous Year, Spell and Week.
I consonant to think of the weekly Pivot Point as the short - term trend, the monthly as the medium term trend and the Yearly as the long - term trend. I find this principally more useful in Spot Forex. If I am below the yearly, monthly and weekly Pivot Point, I know I am in a muscular down trend and I can scale into multiple positions over time. The same holds true for expanded positions.
The point is there are so many ways to establish trend. You can also utility Pivot Point to find potential Support and Resistance, which we will cover in later lessons.
Experiment on Pivot Points and see if it is suit to your trading style. At the very aboriginal it is always handy to notice locality they are and it may sustenance you cinch which meed of the market you should be trading from.