Posted on 22 June 2010
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
Related Posts:
Popularity: 4% [?]
Posted on 20 May 2010
click image for larger view
When the first twin tower reversal pattern formed which was straddling the central pivot point and also clearly rejecting the daily open line I figured this was a good place to get short. The price action that ensued to say was volatile is an understatement, price came all the way up to the daily open with a lot of momentum and at the time I figured this trade is dead in the water.
It then dropped again rapidly to ultimately form another reversal pattern an evening star pattern, this back and forth price action went on for the next couple of hours. Price ultimately formed a pennant and eventually broke down and ran all the way to S1. What kept me in the trade was the continuing formation of reversal patterns which indicated to me that price would eventually go down, also the fact that all this was happening below the daily open was extra evidence supporting my analysis.
Note that all these areas that I am talking about being support or resistance are just that AREAS. It is not a line in the sand, I look for price action in relation to the area and take action accordingly. Price sometimes comes up short of the area and other times pushes right through before reversing, this is where discretion comes into it and a lot of practice. practice, practice, practice.
This is something I think a lot of people don’t consider when trading, I feel they think once they have a system they are good to go but I think that implementing these things still requires a lot of practice. For example just because Tiger Woods new how to play golf did not make him the best in the world. Lots and lots of practice made him the best in the world.
This is where I use ForexTester2 as it allows me to practice and hone my skills a lot more than any demo account ever will. For example the trade I just discussed here happened over an eight hour period, with ForexTester2 I can cover a couple of years of data and thousands of trades in this time, this equates to much more experience and price action analysis. Trading is like any other skill to stay in form you need to practice your skills all the time too stay on top of your game.
Trade Well
Perry
Related Posts:
Popularity: 4% [?]
Posted on 20 May 2010
It is amazing just how predictive these pivot points are. Check out the following charts and notice just how price reacts to these points, here you can see how price opened for the day and ran up to the central pivot point where it formed an enormous Doji and then reversed and dropped like a brick all the way back down to the previous low.
Note how price was unable to close above the central pivot point and then just collapsed back down to the most recent significant support level.
click image for larger view
The price action that followed was just as impressive. Look how price consolidated at the support level of 1.4240 and see how price formed a bullish engulfing pattern followed buy an inside bar. The combination of these two patterns and the support level should be enough for any trader to take a long position.
The action that followed was even more impressive, price ran up and through the central pivot only to retest the pivot level and then run straight up to S1 for a total distance traveled of 220 pips. For these levels to hold so well it tells me that there must be an awful lot of traders using these levels and I would hazard a guess that many of these traders are trading quite substantial accounts.
click image for larger view
My goal here is to ride on the shirt tails of these traders. I don’t have to capture the whole move only a piece of it. These levels definitely help with the decision making process when it comes to deciding whether to take a trade and also where to take profits.
Trade Well
Perry
Related Posts:
Popularity: 3% [?]
