Indicator Classic Pivot Points
Page 1 of 4 1234 LastLast
Results 1 to 10 of 39

Thread: Indicator Classic Pivot Points

  1. #1
    Trader Doge's Avatar
    Join Date
    Mar 2015
    Location
    Very Knowledge.
    Posts
    748
    Thumbs Up
    Received: 132
    Given: 875

    Indicator Classic Pivot Points

    Classic Pivot Points indicator is a bunch of Support and Ressistance lines, the main ones named Support 1, 2 and 3, Pivot Point, Resistance 1, 2 and 3 (seven lines). Those lines' value lasts for a day and are calculated based on the previous trading day's High, Low and Close prices.
    There is more than one way to calculate Pivot Points - we are focusing on the Classic one. This is Pivot Point being (High+Low+Close)/3; Range - High-Low; Support 1 is 2*PP-High, Resistance 1 is 2*PP-Low; Support 2 and 3 are PP-R and PP-2*R; Resistance 2 and 3 PP+R and PP+2*R.
    Other approaches include PP = (H+L+C+O)/4; PP=(H+L+2*C)/4; Support 1 being a Fibbonachi number of Support 2 and/or Range; Standart Deviation etc. etc.
    There are multiple indicators around calculating these, some platforms like NinjaTrader and TradeInterceptor have them included, some brokers provide custom indicators - it doesn't matter where we take them from - as long as the calculations are the same it is Classic Pivot Points.

    Not allowed!
    Wow. Much Forex. So Monies. Very Opportunity.Many Trade. So Amazed. Wow.

  2. #2
    Trader Doge's Avatar
    Join Date
    Mar 2015
    Location
    Very Knowledge.
    Posts
    748
    Thumbs Up
    Received: 132
    Given: 875
    There are some fundamental factors that make possible the working of the Classic Pivot Points in some markets.
    We know that in financial markets there is both real and Speculative trading - Real trading means actual exchange of goods and money and Speculative means no exchange of anything - just opening and closing positions on diferent prices without any interest in the underlying actives.
    In those markets where there is Real trading there are contragets that are bound to make trades every day. This trading is mostly planned from the previous day - such trading includes banks' balance sheets and clearing foreign currencies saldos, goods and energy producers purchasing raw materials and fuels, governments adjusting currency and precious metal reserves and many more.
    Real trading attracts additional Speculative as there are big orders who get partial fills and HFT software and floor scalpers (in current days this is mostly done online also, but offices are close to the exchanges and often rely on faster connection for an advantage) get to make profits from that.
    What is interesting to us is the planned trading, which is done so very often on the basis of some kind of Pivot Points, the Classic type being the most common.
    On such markets there are more (than the average for the market) liquid levels forming around the Classic Pivot Points values, the result of which is attracting the price action like a magnet attracts metal the closer it gets.

    Not allowed!
    Wow. Much Forex. So Monies. Very Opportunity.Many Trade. So Amazed. Wow.

  3. #3
    Trader Doge's Avatar
    Join Date
    Mar 2015
    Location
    Very Knowledge.
    Posts
    748
    Thumbs Up
    Received: 132
    Given: 875
    Factors to choose markets to employ the Classic Pivot Points are mostly fundamental - fundamental in terms of reasons for the volumes of supply and demand on those markets, which is the actual foundation of the markets.
    Another factor to consider is whether the market is the main one - where most trading for the instrument(s) is made on this particular market, or a more secondary one - where a small part of the volume goes.
    This is important mostly for the currency markets - for example if we take eurusd - that is the most traded market in terms of Real volume - a big chunk of Europe-American and Europe-World debt, goods, raw materials etc. etc. trade connected currency exchange is done there. Some of this trade goes also in pound sterling or Swiss franks. If we take the usdchf market in connecition it is more than 50 percent correlation - especially intraday. If we take the eurchf market - there is totally different story there - there is a very little part of the Real trading in this market both for the Euro and the Swiss frank. If we try to put Classic Pivot Points there we will most surely notice that they are 'not working'. This should not surprise us because of the reasons mentioned.

    Not allowed!
    Wow. Much Forex. So Monies. Very Opportunity.Many Trade. So Amazed. Wow.

  4. #4
    Trader Doge's Avatar
    Join Date
    Mar 2015
    Location
    Very Knowledge.
    Posts
    748
    Thumbs Up
    Received: 132
    Given: 875
    Markets like Oil and Gold are best as there is both Real trading made there, big amounts of Speculative and also they are major markets where the leading part of the supply and demand is presented.
    If we prefer to trade currencies eurusd is probably the best, as it is the leading intercontinental currency exchange market for Real trading, there is lots of Speculative and half the volume of all currency exchange happens there.

    Not allowed!
    Wow. Much Forex. So Monies. Very Opportunity.Many Trade. So Amazed. Wow.

  5. #5
    Trader Doge's Avatar
    Join Date
    Mar 2015
    Location
    Very Knowledge.
    Posts
    748
    Thumbs Up
    Received: 132
    Given: 875
    Here is one example of Classic Pivot Points - we can see the impulse up that couldn't actually reach the level, then instead of a reaction price action slides up just to touch it and then goes into an inactive range.

    http://i.imgur.com/bbLzKxG.png

    Not allowed!
    Wow. Much Forex. So Monies. Very Opportunity.Many Trade. So Amazed. Wow.

  6. #6
    Trader Doge's Avatar
    Join Date
    Mar 2015
    Location
    Very Knowledge.
    Posts
    748
    Thumbs Up
    Received: 132
    Given: 875
    Important thing to watch out for on futures markets are the rollover days - especially if our broker gives continuous quotes (meaning there is available one CFD only which is based on the current contract that changes every month or quarter, not multiple CFDs where we must change every month or quarter).
    Classic Pivot Points drawn on such continuous quotes have no value, because there is no trading based on them. The actual Pivot Points are on the underlying futures contract, which mey differ significantly in prices from the continuous CFD.

    Not allowed!
    Wow. Much Forex. So Monies. Very Opportunity.Many Trade. So Amazed. Wow.

  7. #7
    Trader Doge's Avatar
    Join Date
    Mar 2015
    Location
    Very Knowledge.
    Posts
    748
    Thumbs Up
    Received: 132
    Given: 875
    Classic Pivot Points sometimes give valuable clues to coming big breakouts and trends - when a trading range is formed just before a level.
    It needs further confirmation of course, but when we see this it is probably the earliest clues to the incoming happiness for the account, as such moves are generally very cheap to enter (a stop could be the breakout 3 minute bar which is like less than 10 pips on eurusd) and give extremely high rewards. Good managment of such position may give R/R ratio of more than 10/1.
    Sad thing is this happens rarely - like once a week or less for a market.

    Not allowed!
    Wow. Much Forex. So Monies. Very Opportunity.Many Trade. So Amazed. Wow.

  8. #8
    Trader Doge's Avatar
    Join Date
    Mar 2015
    Location
    Very Knowledge.
    Posts
    748
    Thumbs Up
    Received: 132
    Given: 875
    Classic Pivot Points 'work' only if there is no big trend on the day. That may be explained with Real volume and the part of Speculative being about the same every day and non-related Speculative being the only significant change over the days. If there is a big trend that attracts more Speculative volume which is based on the trend mechanics, namely supply/demand/support/resistance levels based on the dynamics of the trend, which overwhelms the Pivot levels.

    Not allowed!
    Wow. Much Forex. So Monies. Very Opportunity.Many Trade. So Amazed. Wow.

  9. #9
    Trader Doge's Avatar
    Join Date
    Mar 2015
    Location
    Very Knowledge.
    Posts
    748
    Thumbs Up
    Received: 132
    Given: 875
    If we calculate some rough liquidity and volatility measurments in terms of reported volume on the futures markets and average daily range in pips/dollars we can characterise markets one more way.
    This usually results in more ballanced trends vs. more small ranges and rapid moves between them.
    It is normal for markets where volatility is comparatively bigger to liquidity (those with manyt small ranges and rapid moves between them - like Gold or GBPUSD) to be formed two levels - one right above and one right below the Pivot level. This knowledge might give us a few more pips if we base our exits on Pivots.

    Not allowed!
    Wow. Much Forex. So Monies. Very Opportunity.Many Trade. So Amazed. Wow.

  10. #10
    Trader Doge's Avatar
    Join Date
    Mar 2015
    Location
    Very Knowledge.
    Posts
    748
    Thumbs Up
    Received: 132
    Given: 875
    Pivots might differ a few ticks from broker to broker because if spreads and close-time volatility - this is also important to know - in most cases it is good to watch two streams at least.
    There is a great example for this double zone on the Gold market today:

    http://i.imgur.com/Wh1yqbQ.png

    Not allowed!
    Wow. Much Forex. So Monies. Very Opportunity.Many Trade. So Amazed. Wow.

Page 1 of 4 1234 LastLast

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •