Pivot Points Find Support and Resistance Points

POSSIBLE OUTCOMES WHEN PRICES ARE NEAR PIVOT AREA        

You need to stay in the “now,” to focus on the current market condition or environment. Keep telling yourself that what happened in the past or perhaps even your last trade is of no concern to the current trade you are in. Remember that each trade will have a different outcome. The patterns we see and the way a market behaves at or near a pivot point support or resistance level will be different. Therefore, the velocity and the magnitude of a price move will vary every time. For example, as shown in Figure 5.1, prices could come close to but not exactly hit the pivot level. That does not mean prices will do that every time. As Figure 5.2 shows, prices can exceed resistance by a small margin; this may invite you to buy a breakout of the resistance level and trap you into buying the high. Then, as Figure 5.3 illustrates, prices can hit the pivot support number exactly, which does happen frequently. But if you program yourself to anticipate, that will be the outcome every time; you will be in for a rude awakening due to the potential that Figure 5.4 represents the occurrence that sometimes prices just come close and consolidate or congest near the pivot point support or resistance levels for a period of time before reacting off those levels. Once again, the market’s past performance is not indicative of future results; so we need more information in the thought process to initiate a trade and to exit a trade. The pivot point levels will allow you to set up a particular game plan; therefore, when you apply more layers of analysis, such as candle patterns and a moving average approach of the pivot point, that is where you will improve on your trading decisions, from both your entries and your exits.

DETERMINE THE RANGE       

Data should be used for the all session trading markets with the close of business as the settlement price. In the futures markets, I do not use just the U.S. markets’ open outcry trading session. Here is why: The night sessions of most markets include the Asian and the European markets; and those participants do trade in U.S. financial markets. If an event took place that caused a market to move and a trade price was recorded, then it is a valid price point and will be put in the history books as a trade occurring. Therefore, I consider that information as accurate from a valid trading session. Most U.S. retail or individual speculators may not be up at 3 a.m. (CT) trading off a market move; but potentially, professional traders are, and therefore the information is considered valid. Gosh, even the exchanges seem to believe it’s valid since money moves into and out of an account if a trade is made; so the high or low of that period should be considered.