Pivot Points trading is the most basic trading strategy has been around for a long time and was originally used by floor traders. This was a nice simple way for floor traders to have some idea of where the market was heading during the course of the day with only a few simple calculations.
Pivot point calculations are commonly used in the Equity,Forex,and Commodity futures markets.These calculation are used by the floor traders to predict support and resistance levels.
Pivot Points are support and resistance are calculated using the high, low,and close, from the previous(Yesterday/Last) trading session. The pivot Point, support and resistance calculated from that are collectively known as pivot levels.
Standard pivot levels include the pivot point itself, three full Support levels, and three full Resistance levels.Pivot points are used as support and resistance levels, and as areas where significant price movement should be expected (such as reversals, or breakouts).
Resistance
A resistance level is a price that tends to prevent further upward movement.
Support
A support price is a price that tends to prevent further downward movement.
Trading with Pivot points:
Trading based pivot point on two prevailing tendencies
Pivot point calculations are commonly used in the Equity,Forex,and Commodity futures markets.These calculation are used by the floor traders to predict support and resistance levels.
Pivot Points are support and resistance are calculated using the high, low,and close, from the previous(Yesterday/Last) trading session. The pivot Point, support and resistance calculated from that are collectively known as pivot levels.
Standard pivot levels include the pivot point itself, three full Support levels, and three full Resistance levels.Pivot points are used as support and resistance levels, and as areas where significant price movement should be expected (such as reversals, or breakouts).
Resistance
A resistance level is a price that tends to prevent further upward movement.
Support
A support price is a price that tends to prevent further downward movement.
Trading with Pivot points:
Trading based pivot point on two prevailing tendencies
If the market opens above the pivot point(P) then the bias for the day is long trades.
If the market opens below the pivot point(P) then the bias for the day is for short trades.
If a day’s price opens above the pivot point, prices will tend to stay above that point (fulcrum) until it reaches a resistance point. Conversely, if a day’s price begins below the pivot point, the price will tend to stay below that point until it reaches a support point.
The three most important pivot levels are
Pivot point -P
First Resistance-R1
First Support-S1.
The general idea behind trading pivot points are to look for a reversal or break of R1 or S1. By the time the market reaches R2,R3 or S2,S3 the market will already be overbought or oversold and these levels should be used for exits rather than entries.
A perfect set would be for the market to open above the pivot level and then stall slightly at R1 then go on to R2. Traders would enter on a break of R1 with a target of R2 and if the market was really strong close half at R2 and target R3 with the remainder of position.
Market Open is above Pivot: Buy
Market Open is below Pivot: Sell
Place Buy and Sell stops bracketing the Pivot. Whichever is not filled acts as safety stop for the other.
First Fundamental Of Pivot Trading after the opening range (first 15-30 min. to one hour), if price is above/below the Pivot, Price Action will strongly tend to remain above/below the Pivot for the session.
'Avoid buying the High or selling the Low'
If the market opens, or later trades at the extremes (R2, R3 or S2, S3), it will exhibit a tendency to trade back toward the Pivot. Thus, the general rule, 'Avoid buying the High or selling the Low', becomes increasingly more stringent as price moves farther from the Pivot.
If, after starting the day above the Pivot, the Price crosses back through the Pivot, the Pivot will act as a Resistance area. Pivot Points and Support and Resistance levels behave exactly like any historical Support and Resistance level.
If the market opens below the pivot point(P) then the bias for the day is for short trades.
If a day’s price opens above the pivot point, prices will tend to stay above that point (fulcrum) until it reaches a resistance point. Conversely, if a day’s price begins below the pivot point, the price will tend to stay below that point until it reaches a support point.
The three most important pivot levels are
Pivot point -P
First Resistance-R1
First Support-S1.
The general idea behind trading pivot points are to look for a reversal or break of R1 or S1. By the time the market reaches R2,R3 or S2,S3 the market will already be overbought or oversold and these levels should be used for exits rather than entries.
A perfect set would be for the market to open above the pivot level and then stall slightly at R1 then go on to R2. Traders would enter on a break of R1 with a target of R2 and if the market was really strong close half at R2 and target R3 with the remainder of position.
Market Open is above Pivot: Buy
Market Open is below Pivot: Sell
Place Buy and Sell stops bracketing the Pivot. Whichever is not filled acts as safety stop for the other.
First Fundamental Of Pivot Trading after the opening range (first 15-30 min. to one hour), if price is above/below the Pivot, Price Action will strongly tend to remain above/below the Pivot for the session.
'Avoid buying the High or selling the Low'
If the market opens, or later trades at the extremes (R2, R3 or S2, S3), it will exhibit a tendency to trade back toward the Pivot. Thus, the general rule, 'Avoid buying the High or selling the Low', becomes increasingly more stringent as price moves farther from the Pivot.
If, after starting the day above the Pivot, the Price crosses back through the Pivot, the Pivot will act as a Resistance area. Pivot Points and Support and Resistance levels behave exactly like any historical Support and Resistance level.
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