4 Powerful Pivot Point Strategies
- Date: 2008-08-31 - Word Count: 429
Share This!
Pivot points used to be a favorite on Wall Street, but like other technical indicators, pivot points are time consuming to calculate. Thanks to computers and plenty of web resources, it is now possible to calculate pivot points in seconds. Professional traders have long used pivot points as a way to define support and resistance lines before the market even opens. Pivot points are very successful because they predict the market rather than lag it.
How they work
Pivot points work best in sideways trends because that is practically what they predict. The lines that make up a pivot point calculation define a very tight trading range that isn't very conducive to uptrends and downtrends. Many profitable traders use pivot points on a daily basis to get an idea of the next day's trading range before the market even opens.
Open below the pivot
An open below the pivot point is considered to be very bearish and might induce a downtrend, but not for very long. The way pivot points are designed suggests that the price can only fall so long before it hits a support line that makes up the pivot calculation. Creative techniques for playing the bounce usually include shorting the price until it hits the next support line.
Open above the pivot
If the market opens above the pivot, it is said to be very bullish to the next resistance line built into the pivot calculation. Used with other creative techniques and technical analysis indicators, the open up can bring a strong uptrend. However, be careful, as the resistance lines in a pivot point tend to be very strong.
Playing the bounce off the middle pivot
In the center of each calculation is a very strong line known as the pivot. A bounce off the central pivot is always very strong, and breakthroughs come with the same strength. Some professional traders like to play the bounces off this line, while others instead choose to avoid it. Depending on your risk tolerance and ability to make quick decisions, the pivot point might not be the place for you.
Mixing pivot points with candlesticks
This is by far the best strategy, as is any strategy with more than one indicator. If the price has rallied through a few pivot resistance lines before making a bearish candlestick figure, such as the shooting star, the chances of a sell off and upcoming downtrend are very likely. Just as the support and resistance lines often indicate a reversal, the confirmation of a candlestick pattern is very rewarding. Also, oscillators and momentum indicators work very well to make a trading decision.
How they work
Pivot points work best in sideways trends because that is practically what they predict. The lines that make up a pivot point calculation define a very tight trading range that isn't very conducive to uptrends and downtrends. Many profitable traders use pivot points on a daily basis to get an idea of the next day's trading range before the market even opens.
Open below the pivot
An open below the pivot point is considered to be very bearish and might induce a downtrend, but not for very long. The way pivot points are designed suggests that the price can only fall so long before it hits a support line that makes up the pivot calculation. Creative techniques for playing the bounce usually include shorting the price until it hits the next support line.
Open above the pivot
If the market opens above the pivot, it is said to be very bullish to the next resistance line built into the pivot calculation. Used with other creative techniques and technical analysis indicators, the open up can bring a strong uptrend. However, be careful, as the resistance lines in a pivot point tend to be very strong.
Playing the bounce off the middle pivot
In the center of each calculation is a very strong line known as the pivot. A bounce off the central pivot is always very strong, and breakthroughs come with the same strength. Some professional traders like to play the bounces off this line, while others instead choose to avoid it. Depending on your risk tolerance and ability to make quick decisions, the pivot point might not be the place for you.
Mixing pivot points with candlesticks
This is by far the best strategy, as is any strategy with more than one indicator. If the price has rallied through a few pivot resistance lines before making a bearish candlestick figure, such as the shooting star, the chances of a sell off and upcoming downtrend are very likely. Just as the support and resistance lines often indicate a reversal, the confirmation of a candlestick pattern is very rewarding. Also, oscillators and momentum indicators work very well to make a trading decision.
Related Tags: profitable traders, professional traders, creative techniques, uptrend, downtrend, sideways trends
Learn how to master day trading by downloading two of Trading EveryDay's FREE products: Tools of the Trade eBook and a Trading Plan Planner. Dedicated to helping people become profitable traders, Leroy Rushing, a professional day trader, trading coach, and author, is the CEO of Trading EveryDay, a distinguished provider of educational trading products and services. Your Article Search Directory : Find in Articles
Recent articles in this category:
- Why Invest In Mexican 50 Peso Gold Coin Now?
Nowadays, Mexican coin has become one of the HOT items among collectors and gold investors. The Mexi - How Private Trade Programs Work In A Declining Economy
Maybe it is the degradation of the economies of whole, or the lackluster performances so many are ex - Why You Should Convert an IRA Rollover to a Roth
Many people are interested in converting an IRA rollover to a Roth. That is understandable. W - Should I Still be Holding on to My Equity Investments?
A financial advice firm which follows a very similar approach to ours in the USA is Merriman Berkma - Stock Market Holidays
Daily Market Commentary for November 26, 2008 from Millennium-Traders.ComAhead of the Thanksgiving - An IRA Rollover Vs Transfer
Knowing the difference between an IRA rollover VS transfer can save you money, when tax-time comes - Gold and Silver Trading-know These Before You Want to Trade on Metals
Gold and silver trading has become quite obvious alternative especially with current volatile situ - Double Your ROI With a 403b Rollover to IRA (individual Retirement Account)
You can make a 403b rollover to IRA of the traditional type, without incurring extra income taxes - When The Pros Fail Homeowners
When a homeowner is fighting foreclosure there are several things that they attempt to do before see - Social Responsible Investing For A Better (investment) World
Social Responsible Investing (SRI), also known as sustainable investing or ethical investing has ori
Most viewed articles in this category:
- Investor Stress: A New Approach
George Muzea is both an investor and a stock market advisor. In any given month, he will be paid $10 - Real Estate Investment Financing
1. Location: Your real estate investment's location is arguably the most important component of your - Canadian Oil Sands - Who Are the Major Players
The Canadian oil sands represent one of the most lucrative investment opportunities to oil and gas i - Why Bulk Preconstruction?
Bulk preconstruction is the latest trend in secure, high profit real estate investing. By buying wit - Investing - It Is Not As Scary As You Think
Many people want to have more money - OK everyone does. However, most people don't know how to go a - How Do I Know Which Programs Are Scams?
Although it is virtually impossible to tell if a HYIP is a scam until the moment when they stop payi - Currency Trading Success - 6 Tips to Increase your Profits
If you want to increase your profit potential and achieve currency trading success then the simple t - The Business Cycle
Investors who want to beat the market should be followers of the business cycle. The business cycle - Pros and Cons of Real Estate
Like any other profession, there are good and bad things about what are available. Each of the thin - The Fixer Upper
Real estate investing has become almost a national pastime. Millions are made every year on the buyi
