PIVOT POINT SUPPORT AND RESISTANCE

The idea that price patterns follow a retracement ratio is also expressed in the technical
concept of pivot points. Pivot points are used by many traders and were developed by
floor traders at the exchanges. John L. Person’s book, Forex Conquered (John Wiley &
Sons, 2007), presents a very specific variation on the use of pivot points. We want to
introduce the concept here.
The advantage of pivot points is that they are essentially objective in nature. Other
forms of resistance projections such as Fibonacci levels, Elliot wave, and so on, have an
element of subjectivity, and as a result people may draw those lines differently.
Pivot points focus on the immediate trading session behavior and ranges. They provide
a good sense of the psychology of the session. The pivot point equation generates
a number that combines the high, low, and close and divides it by three, generating the
pivot point number. The basic idea is for traders to assess what happens when the price
probes that number. The pivot point number is, in the words of John Person, “the focal
point.” What is particularly interesting is the pivot point’s overlapping or converging with
a Fib line or with another important indicator. Figure 11.8 shows an EURUSD hour candle
chart where the pivot point converges with a hesitation candle known as the “Doji.”

In this particular case, it is near a Fib line. Remember that the lower the time interval
used, the less stable or reliable are the pivot points.
This is a handy tool, and one you can access at www.learn4x.com/calculator.




By ABE COFNAS