Part 29 Technical Analysis – Pivot points Be One Step Ahead!

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Part 29: Technical Analysis – Pivot points: Be One Step Ahead!

Do you make an analysis each day trying to predict today’s price movements? Would you like to know the estimated size of a price movement and important support and resistance levels?

Good, today I’m going to show you how to do it. It’s all very easy. This topic is called pivot points.

What are pivot points?

You won’t find this topic in literature too often. People assume that you know the meaning and tend not to explain any details. If you want to participate in trading you should at least know what they are talking about and accept the basic logic behind each trading strategy.

In the past, traders realized that each market has a memory. As mentioned, the market is a living organism (no wonder it’s composed of people). The market tends to react to prices occurred recently.

If you want to use pivot points in your trading take the average, close, high and low from the previous day and divide the total by three. This simple calculation will give you the central pivot i.e. a likely level for the next trading day. Based on the calculations of high and low from the previous day you can determine the support and resistance levels.

Calculation of pivot points

Don’t be afraid. The calculation is very simple. As mentioned above, the calculation of the central pivot point (marked P) is done under the following formula: close + high + low : 3.

To calculate the first resistance, use P, multiply by two and deduct yesterday’s low. The calculation of support is a similar process. Deduct yesterday’s high from twice the central pivot point. You can continue by using the support levels and resistance levels for the calculation of higher support and resistance levels (i.e. more distant from the central pivot point).

Pivot points put into a graph

Formulas:

  • C1 yesterday’s CLOSE
  • H1 yesterday’s HIGH
  • L1 yesterday’s LOW
  • Central pivot point (P) = (H1 + L1 + C1) / 3
  • First resistance (R1) = 2×P – L1
  • First support (S1) = 2×P – H1
  • Second resistance (R2) = P + (R1 – S1)
  • Second support (S2) = P – (R1 – S1)

A setting of pivot points

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Using pivot points

The pivot points trading strategy is similar to initial balance trading. (What is an initial balance?). You have a spread for the day. Once the market reaches the spread, it can either bounce back to the central pivot point or break. The pivot points trading strategy won’t tell you what happens to the support levels and residences but it’s very likely that these will be the levels at which the market reacts. To forecast the future reaction you can use various tools such as ADX or Stochastic.

There are several options to proceed: You can wait for one candlestick for a break or come back and then make a trade. Alternatively, you can look for another confirming pattern. The pivot points trading strategy is a handy indicator but when complemented it is even better. Knowing that the range between the first support and resistance is bigger or smaller than usual can also be useful. If the range is too big we might draw a parallel with a marathon runner who after finishing a marathon race is too exhausted to repeat his excellent performance. Similarly, the market will be exhausted too to break the range. On the contrary, if the market is perfectly recovered and the range is small you may expect a break.

What to do with pivot points

Pivot points are a great tool. I would not construct my trading strategy purely on pivot points but in combination with an indicator or a graphical formation, I would.

Proof that pivot points work well in practice, not just theoretically.

The benefit is the robustness of the system that can be applied to any instrument available in the market be it forex, commodities or cryptocurrencies. I recommend you dedicate one morning to testing this strategy on historical data of your chosen instrument.

Author

More about the author J. Pro

Unlike Stephen (the other author) I have been thinking mainly about online business lately. I wasn’t very successfull with dropshipping on Amazon and other ways of making money online, and I’d only earn a few hundreds of dollars in years. But then binary options caught my attention with it’s simplicity. Now I’m glad it did because it really is worth it. More posts by this author

Technical Analysis Show

Technical analysis is one of the two main types of an analysis. Using technical analysis, the traders assume that with the help of specific formulas, indicators and various techniques of reading charts, their chances to predict future trends will increase.

Technical analysis is used by the vast majority of binary options traders. The technical analysis category covers all kinds of trading strategies based on price movements, volumes, trends and indicators.

On this page, you will see a set of articles on the technical analysis for assets such as currencies, commodities, indexes and shares. We strongly recommend you learn the basics of technical analysis. This is the only way for a new trader to become a profitable trader.

Technical analysis can help you not only in binary options trading, but also in the trading of Forex and CDF.

There is basically one major difference between binary options and CDF (Forex) trading. Whereas with binary options you are dependent on a preset timeframe, with Forex you can hold

A chart showing how traders using technical analysis might open a trade

your position as long as you wish. This gives you a certain advantage as you can wait until the best time to close your position.

No matter what assets you prefer, I recommend you learn the technical analysis and use in your trading.

Good luck when analysing the charts!

Articles about Technical Analysis Show

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10Y US TREASURY NOTE|PREMIUM[LONG-TERM]PRICE ANALYSIS|PART 1/2|

ZN1!: Series on BondsSept 20th 2020(4-5 minute read)

This is a two part analysis on the US 10 year Treasury note, the second part analyses the yield. In my opinion, technical analysis is somewhat (okay-ish) effective in analysing bond price action, especially to bonds with longer maturities. This is because they are priced in terms of private expectations. Which are based on market psychology principles that are one of the main foundations for technical analysis . Fundamentally, building models with matrixes of auctions prices is the better method, however as an individual retail trader with limited time, it’s quite an unrealistic thing for me to do.

Now, let’s begin by analysing the structural wave build up. The closing monthly top on Wave 1 after the 2001 recession(

117$) provided for the impulsive wave buildup. Unfortunately, I would have prefered if the data extended back to 1984 for a more accurate trend analysis, but from the current chart a precise EW buildup can be observed. Wave 3 (top 134) happened after the 2008 recession.

Both of these bullish waves continued to form, despite an official NBER recession ending announcement. In my opinion, a more accurate estimation of the recovery in the economy can be observed from the bond market as compared to purely basing such an observation from equities. Despite the official end of the recession being June 2009, the unemployment rate peaked later that year.

Zoomed in chart 2020-2023 potential triangle build up in case a cycle extension happens.
To sum up this analysis, in case a recession occurs, based on the wave build up- the maximum target for wave 5, would be in the range of 146-153. I am not sure if the Wave V would have have a 2.62 extension( based on the already low yields This analysis supports my previous extensive work on FED rate cycles(Link #1 below). The blurry WXY at the end of the chart is what I would expect during the next extension. I have to emphasize that I attempted to find a pattern in the Moving averages and other technical indicators, but came to the conclusion that they are simply not as precise as the Elliott Wave Setup. This is it for part one, make sure to check the much more complicated Part two Yield analysis on the 10 year US T Note.

|Step_Ahead_oftheMarket|
P.s. Would appreciate some feedback charts or simple comments expressing your opinion on the bond market, thanks!

>>I do not share my ideas for the likes or the views. This channel is only dedicated to well informed research and other noteworthy and interesting market stories.>>
However, if you’d like to support me and get informed in the greatest of details, every thumbs up or follow is greatly appreciated!

Some of my popular analysis relevant to the bond market:

1. RECESSION IMPENDING?(PART2)FED RATES SUPERCYCLE|PREMIUM ANALYSIS:
tradingview.com/chart/FEDFUNDS/H2iTE7ig-RECESSION-IMPENDING-PART2-FED-RATES-SUPERCYCLE-PREMIUM-ANALYSIS/

2. The VIX: tradingview.com/chart/VIX/JqftOGwh-RECESSION-IMPENDING-MEDIUM-TERM-VOLATILITY-VIX-PREMIUM-ANALYSIS/

3. XLUSPX Sectors Finale: tradingview.com/chart/XLU/B0BlK6dE-US-SECTOR-SERIES-FINALE-11-11-UTILITIES-XLU-ESSENTIAL-TA-NOTES/

Full Disclosure: This is just an opinion, you decide what to do with your own money. For any further references or use of my content for private or corporate purposes- contact me through any of my social media channels.

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