Pivot Point
Candlefocus EditorPivot Points are calculated from the values of the previous trading day’s open, high, low, and close (OHLC) as a base point. Depending on the trade strategy and style, various other mathematical equations can be used to further calculate the Pivot Points and the three support and resistance levels of the day. By identifying trading support and resistance levels, pivot points can help find entry and exit points for traders.
The key benefits of using pivot points are that they are simple and described in detail. Pivot points reduce the amount of time traders spend trying to find good entry and exit points. As most technical analysts know, spending hours drawing and analyzing trend lines can be avoided by simply looking at the daily pivot points.
Trend lines require traders to look back at past up and down-trends, while pivot points focus on the current day's price movements. This helps traders minimize their risk while also helping them maximize their profits. It is also important to note that pivot points are objective and do not involve trader emotion or bias.
Pivot points can also be useful in Forex trading. By using these levels, it’s easy to identify when currency pairs have reached an extreme low or high. As a result, traders are able to limit any potential losses by exiting the market when it reaches its highest or lowest level for the day.
Ultimately, Pivot Point analysis is a versatile and reliable tool for traders of all levels. By using pivot points, traders can quickly identify key levels of support and resistance and plan their trading strategies accordingly. Using this information, traders are then able to maximize their profits while minimizing risk. Although pivot points are especially useful in day trading, they can also be used to identify long-term trends and reversals. With the right technical indicators and a mix of other tools, pivot points can prove to be an invaluable tool in every trader’s arsenal.