Still not convinced that these Pivot Points have any merit, well just have a look at the following chart of last night’s price action.
click image for larger view
Note how price formed an Inside Bar on the daily open at point A indicating a potential reversal and then dropping directly to point B which just happens to be exactly at the S1 pivot point. This was followed by a huge run straight up to the central pivot point at point C and even here you can clearly see players taking profits.
Just by observing the price action around these Pivot Points it becomes quite obvious that there are plenty of orders taking place in these areas, clearly there are many other players using these same Pivots.
They are sometimes referred to as floor Pivots which is because they are used by many floor traders and have been for a very long time. Many of these floor traders are trading quite large volume and therefore generating some of the huge moves that we do witness in the market. The goal here is to ride on the shirt tails of these same floor traders and capture some of the moves that they are.
One of the greatest advantages that you gain by trading with pivots is you have definite areas where not only to place your entries but also where to take profits. Profit taking is one of the most challenging skills in trading and just with the use of these Pivot Points you have a clear and concise place to position your orders.
While most indicators are what we call lagging indicators because they are derived from the price action that has already happened Pivot Points are a leading indicator as they are indicating these levels long before price arrives.
Trade Well
Perry
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