Pivot Points for Dummies

Hey you dirty freaks. Get ready for another totally awesome, fundamentally life-changing binary trading tutorial from your favourite trading mofo on the Goddamn planet. A.k.a me. Today we’re going to look at pivot points and how to add them to your trading game.  The simplest way to explain what pivot points are is to say they are an average of the highs, lows and closing prices for any given asset relating to the previous day’s trading activity. Why do you need these? Well they make useful support and resistance levels that you can use to pinpoint the best moments to enter your trades. Most free charting platforms offer you the ability to add pivot points to your charts, so you don’t have to do any of the number crunching yourselves. Once these pivot points are up on your graph you can use them to determine whether today’s prices are in line with yesterday’s pivots. What you’re looking for is to see today’s price action confirms or rejects these pivot points. Generally 3 instances of this taking place should lead you to regard the indicator as performing correctly or being off, once this becomes clear you can either use it to create trading signals for yourself going forward, or abandon it and try something else.

 

Generally at times of business as usual, i.e. when nothing huge is taking place on the world’s markets to massively change things from one day to the next, pivot points are pretty useful indicators, especially since they are based on very recent price action. When I started messing about with them I quickly realised that they were generating more accurate trading signals form me than my own user-defined support and resistance lines that I was in the habit of creating at the time. Essentially what you get is a line at the top and at the bottom of your graph. Use it to see how closely today’s price action is mirroring yesterday’s support and resistances and remember that when a support is broken through it becomes a new resistance (in other words it becomes hard for prices to go above it) and when a resistence is broken through it becomes a new support (i.e. it becomes harder for the price to fall below). Don’t ask me why, it’s just freaky market voodoo. I only mention it so when you’re experimenting with pivot points and the current price appears to break through (i.e. negate) yesterday’s support and resistance levels, make sure you check to see whether the new support or new resistence is conformed by 3 failures to go upove or fall below. Phew. Okay that’s it for now, go play. And don’t forget to wear a condom

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George Milios

George Milios is the founder of onlineforextrading.net, the binary options and forex news portal which is dedicated to providing you with all the information you need to successfully trade.

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