What is pivot point ?

The pivot point of the current period is calculated as the average of the previous period’s high, low, and close price. Depending on whether the pivot point is above or below the current market price, it becomes a resistance or support level. pivot points required only a few simple calculations yet continuously provided strong signals of times of possible buy signals or sell signals in the market.

What makes a pivot point so important for traders ?

Pivot points are relatively popular due to the fact that they are predictive indicators rather and lagging indicators. Pivot points utilize previous information to predict and draw lines where the market shows potential for encountering support or resistance.

Due to the fact that pivot points are so widely respected, traders generally buy and sell around these areas which in turn makes the pivot points that much more effective and reliable for areas of market movement.

 

pivot
Pivot Point Bear Strategy
The trader will use pivot point levels to plot the movement of price changes. With each passing day, the trader will be able to see how low prices are moving to. To confirm the bearish conditions of the market, traders can use the “inverted hammer” candlestick pattern as an indicator. Using the daily pivot point level as a threshold, if the opening price of the opening candlestick is below the threshold, then the trader can be fairly certain that the market is bearish with prices trending downwards for the day. The same principle can also be applied by traders wanting to trade a bullish market.

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