Trading Pivot Point

You are going to love this lesson. Using the pivot it indicates like a strategy that negotiated has around been during long time and was used originally by the floor retailers. This was an pleasant simple way so that the floor retailers have certain idea of where the market directed during the course of the day with only some simple calculations.

The point of the pivot is the level in which the changes of direction of the market for the day. It is derived to use a certain simple Arithmetic and high the previous days, low and it is closed, a series of points. These points can be critical levels of the aid and resistance. The level of the pivot, the aid and the calculated levels of resistance of that one are known collectively like levels of the pivot.

Newspaper the market that you are following has open, a high one, low point and a closing for the day (some markets as the currency is 24 hours but generally use 5pm EST as the open one and is closed). This information contains basically all the data that you need to use points of the pivot.

The points of the pivot of the reason are so popular it is that they are prophetic in comparison with the termoaislante coating. You use the information of the previous day to calculate potential the crucial moments for the day that you are on the verge of negotiating (present).

Because so many retailers follow points of the pivot you will often find that the market reacts in these levels. This elasticity you an opportunity to negotiate.

Before between how you calculate points of the pivot, as soon as desire to need that it has put a computer in line and one to see

If you would work something the precise pivot, the formula that I use I am down:
Resistance 3 = High + 2*(Pivot - Low)
Resistance 2 = Pivot + (R1 - S1)
Resistance 1 = 2 * Pivot - Low
Pivot Point = ( High + Close + Low )/3
Support 1 = 2 * Pivot - High
Support 2 = Pivot - (R1 - S1)
Support 3 = Low - 2*(High - Pivot)

As you can see of the aforesaid formula, as soon as having high the previous days, low point and you close yourself you end possible for above 7 points, 3 levels of resistance, 3 levels of aid and the real point of the pivot.

If the market opens on the point of the then pivot the diagonal for the day it is long commerce. If the market opens underneath the point of the then pivot the diagonal for the day it is for the short commerce.

The three more important points of the pivot are R1, S1 and the real point of the pivot.

The general concept behind points of the pivot that negotiate is to look for a revocation or a breakage of R1 or S1. For the moment at which the market reaches R2, R3 or S2, S3 the market will be either overbought or oversold and these levels are due to use rather for the exits that the entrances.

A perfect system would be so that the market is opened on the level of the then pivot and to slightly clog in then R1 encenderte to R2. You would enter a breakage of R1 with a target of R2 and if the market were near half really hard in R2 and the R3 target with the rest of your position.

Unfortunately the life is not that simple and we they must occupy of every day that negotiates of the best way than we can.

I have chosen a day at random as of the last week and what follows it is some ideas in how you could have negotiated that day using points of the pivot.

The 12 of August of 04 euro/el dollar (EUR/USD) had the following one:
High - 1.2297
Low - 1.2213
Close - 1.2249

This gave us:

Resistance 3 = 1.2377
Resistance 2 = 1.2337
Resistance 1 = 1.2293
Pivot Point = 1.2253
Support 1 = 1.2209
Support 2 = 1.2169
Support 3 = 1.2125

Have a look at the 5 minute chart below











The green line is the point of the pivot. The blue lines are the levels of resistance R1, R2 and R3. The red lines are the levels of aid S1, S2 and S3.

There are loads of ways to negotiate this day using points of the pivot but I will walk you with some of them and will discuss because something is good in certain situations and because something is bad.

The Breakout Trade
At the beginning of the day we were underneath the point of the pivot, so our diagonal is for the short commerce. A channel formed so you would be looking for to explode of the channel, preferably to the disadvantage. In this type of commerce you would hardly have your order of the entrance of the sale underneath the lowest line of the channel with a parade formation hardly on the superior line of the channel and a target of S1. The problem in this day was that one, S1 was closely together of the level of the removal and was right meat in the commerce not enough (13 pipes). This is a good technique of the entrance for you. Hardly because day was not advisable east, it does not mean that the following day will not be advisable.












The Pullback Trade
This one is one of my favorite that the system raises. The market happens with S1 and later it throws. An order of the entrance is put underneath the aid, that in this case was the point under more recent before pullback. A then shutdown puts on pullback (the most recent overflow - tip) and a target fixed for S2. The problem, in this day was again that the target of S2 was to close itself, and the market never took towards outside the previous aid, that that says to us, the feeling of the market is beginning to change.












Breakout of Resistance
Whereas the day progressed, the begun market to direct endorsement to S1 and formed a channel (area of the congestión). This is another good one installed for a commerce. An order of the entrance is put hardly on the superior line of the channel, with a shutdown hardly underneath the lowest line of the channel and the first target would be the line of the pivot. If where negotiating more than a position, then you would close outside towards half of your position as the market approaches the line of the pivot, you tighten your shutdown and then sights the action of the market in that level. Whereas it happened, the market never stopped and your second then target became R1. This also was reached easily and would have closed towards outside the rest of the position in that level.












Advanced
As I mentioned previous, there are portions of ways to negotiate with the points of the pivot. An advanced method more is to use the cross of two movable averages as confirmation of a removal. You can even use combinations of indicators for ayudarte to make a decision. It can be that it is the cross of two averages and also MACD must be in way of the purchase. The mess around with some of your favourite indicators but remembers that the signal is a breakage of a level and the indicators are right confirmation.












We have not even obtained in patterns around levels or of lack of the pivot but that one it is not the point of this lesson. Hardly desire to introduce another possible way so that you negotiate.

Good Trading

Best Regards
Mark McRae

Information, the letters or the examples contained in this lesson are for the educative illustration and intentions only. Then advice does not have to be considered or a recommendation to buy or to sell no security or financial instrument. And we cannot offer advice of the investment. For additional please read ours of the information disclaimer.

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