Expert Charts, Trading Tips and Technical Analysis from INO. May 2, by Kenny. They spend their days executing a well drafted simple to follow trading plan. You see, it is in the nuance of price behavior where the market's true intent can be recognized.
The first step in understanding that behavior lies in creating a structure in which to analyze the day's activity. First, we define Support and resistance as those price zones where the forces of supply and demand are most likely to meet.
It is at these key junctures where bulls representing demand and the bears representing supply are most likely to do battle, with the victor determining the market's next directional move. Notice, we DO NOT define support or resistance as an area where price WILL change direction.
Floor Traders Pivot Points are defined as a form of Static Support and Resistance.
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They have a gravitational pull, and they work because the large majority of participants believe they work, and therefore the self fulfilling prophecy exists. Floor traders and other professionals who do the actual buying and selling of futures contracts in the trading pits of the exchanges, generally employ very similar systems for valuing the price of such contracts in the absence of significant outside influences. These systems employ a method of calculating relative value based on the price activity of the prior day.
A price equilibrium point is determined as well as support and resistance levels in relation to that equilibrium point. This method is called the Floor Trader Pivot System. Pivot System price levels act as potential support and resistance zones throughout the day.
They serve as focal points for floor professionals as they adjust their bids and offers, especially when trading activity is slow. The principle reference level under this system is the Daily Pivot, or the Pivot Point DPP.
Generally, as we enter each trading day, we regard this level as our balance point between bullish and bearish forces. A demonstration of significant price activity above the Daily Pivot is considered to have bullish implications, while significant activity below this level is bearish.
Although actual trading activity is initiated by a variety of other market indications, we look at price behavior relative to the Daily Pivot level as an aid in determining the market's general directional bias.
The day's trading activity can generally be thought of as revolving around and gravitating towards the Daily Pivot level. As price moves away from this zone and approaches either the first level of resistance R1 or the first level of support S1 , market behavior becomes increasingly critical.
Any rejection of these newly attained levels increases the likelihood of a return to the DP. On the other hand, a breach of either of these levels is regarded as market acceptance and a perceived change in the valuation of the instrument being traded. Additionally, should the market extend its move even further from the Daily Pivot, penetration through each successive level of support or resistance is generally regarded as having drawn in a greater degree of participation from off-floor interests.
An increase in off-floor interests represents a greater likelihood that longer-term positions are being established, resulting in greater potential for the market to trend even further. Each consecutively greater level of Pivot System support or resistance breached is generally regarded as having stirred the interest of successively longer term participants.
For example, if the first level of support S1 is penetrated to the downside, any return to that level is considered a test of that level's integrity. The rejection of any price advance back towards the level of S1 is considered to be a successful test of that breach, and adds to that level's credibility as a renewed valuation point.
Furthermore, any additional move away from that level has the potential to force the market through the next level of support or resistance, drawing players of even a longer time-frame into the market, and so on, continually expanding the market's range of activity.
As price breaks through the levels of R2 or S2 they will most likely resolve the price action in one of two ways. First, we will see an acceptance of the new found value resulting in what we refer to as trend days where price seems to move only in one direction with force. Alternatively, if the new found value is not generally accepted by the longer time frame traders, price will attempt to find its way back to the Daily Pivot Point. The traditional formula for calculating Floor Trader Pivot System Support and Resistance Levels are as follows:.
This formula generally uses what we refer to as 24 hour data, including a high and or a low that may have occurred outside Regular Trading Hours. Alternatively, one could use just the High, Low and Close price information from the Regular Trading Hours to calculate the Pivot Point. Pivot levels of support and resistance can also be applied to the weekly and monthly time frames. Those areas in which multiple levels exist in proximity can be considered to have a greater likelihood of providing stronger support or resistance.Day Trading using Floor Pivots Futures and Forex Examples BY KESEK
The same process can be applied to the monthly time frame to add even more potential for confluence. An important point to remember about these Floor Trader Pivot Numbers is that they act as potential support and resistance zones throughout the trading day.
The "context" in which they occur often determines their significance. Your use of tape reading skills combined with an ability to properly interpret candlestick formations can lead to a very simple, yet powerful trading set up and play a critical role in the appropriate use of Floor Trader Levels as a profit tool. Traders may download a FREE Floor Traders Pivot Point Calculator and Price Projector http: Jim Harrison is the founder of eMini-Master.
An active trader since , M. As principal and President of MJH3, Jim brings intensity and passion for the markets to all his endeavors. July 30, at It would be better if a pdf file is furnished for all the Share market terminologies.
June 13, at I really have no way to respond to the info that you have provided other than to say, that the deeper I go down into the rabbit hole, and I do mean rabbit hole, because I just picked your site randomly in the quest for info. And I really mean that. It seems to me,from my own personal experiences in trading, how much I don't know. However I must say that I am ever optomistic. The Self fulfilling Prophecy? Pulse Markets Futures Stocks Forex World Indices Metals Exchanges Charts Symbol List Extremes Portfolio News Headline News Commentary MarketClub Join Now Top Stocks Top ETFs Top Penny Stocks Top Forex Trend Analysis Videos Market Analysis Email Services Blog Free.
Wednesday Jun 21st, Comments GVS says July 30, at Trackbacks Why A Pivot Points Method Should Be In Each And Every Forex Program says: September 28, at 6: Recent Posts Is Amazon Threatening CVS Health?
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Pivot Points (Floor-Trader Pivots)
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