This article focuses on the importance of Pivot Points in your trading

Last year we looked at Pivot levels as a method of support and resistance. Let’s take a look at another charting technical term; Pivot Points, the critical observation of price movement and a high probability method for building trading plans.

Pivot points are taken in the context of trend, with larger Trends being viewed in high time frames like the Weekly chart. Pivot points can be viewed in any time frame be it weekly or all the way down to 5 minutes. The context of an up trend is a series of Higher Highs and Higher Lows with the observation that when price trades over a previous high price a trend is deemed to be in place. This is the true definition of trend.

When we drill down to individual price bars or candles we can take the high and low of each session and make a reference to the previous trading period to see if the current bar has a higher high- higher low or lower high – lower low. The small graphic below displays the pivot point scenario both down and up. The open and close of the trading period is not taken into account, but only the ranges of each bar. Open your charts and find the pattern.

 

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