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PIVOT POINTS
Pivot point is a level at which the market direction can change.
These points can be critical support and resistance levels.
The reason why pivot points are so popular is the fact that they are
predictive as opposed to lagging.
They are a very popular tool that is used by floor traders and this is also another reason why they are effective.
Here are the formulas for calculating the pivot point levels:
P = (high + low + close) / 3;
R1 = (2*P) - low;
R2 = P+(high - low);
R3 = (2*P)+(high-(2*low));
S1 = (2*P) - high;
S2 = P-(high - low);
S3 = (2*P)-((2* high) - low);
M5 = (R2+R3)/2;
M4 = (R1+R2)/2;
M3 = (P+R1)/2;
M2 = (P+S1)/2;
M1 = (S1+S2)/2;
M0 = (S2+S3)/2;
Pivot Points can be calculated using different time frames, however, the most popular time frame is the daily chart with a consideration of two
options:
1. We take our high, low, and close values using a full 24 hour period from 5PM to 5PM Eastern Time or
2. We take our high, low, and close values using a full 24 hour period from 12am to 12am Eastern Time (midnight to midnight).
Once we obtain our HLC (high low close) values we do the calculations and we get a whole bunch of numbers.
What should we do with these numbers?
We should put a line on our chart at each of these numbers.
These lines will be acting as a future support and resistance levels. The good part is, that we already know at what levels we may get some action
happening.
Here is an example of a chart with the Pivot Point lines already drawn:
You may also want to take a look at a small video that is on the web site that explains a little bit of how these levels are used.
www.korzec.ca/doubles/doubles.html
The pivot point indicator (together with other indicators) can be purchased at anytime. For more information check the "follow up" section, on the right hand
side of the web site.
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