Posted: 01.07.2021 | 04:44
What are Pivot Points?
Individual or institutional investors who trade in money, capital and crypto markets frequently resort to technical analysis methods in market making. One of the most widely used of these technical analysis methods is pivot points analysis.
Pivot points; It is used to determine potential support and resistance levels and the direction of price movement. It is a frequently used technical analysis method because the levels it shows are objective. Investors, who act according to pivot points, give more importance to trend movements and prefer short-term, very medium-term to long-term positions. For this reason, pivot points come across as one of the technical analysis tools that should really be looked at. The points at which the trend changes provide technical information about transitions from a bear market to a bull market or vice versa. Investors who take positions can calculate where the stop loss level should be placed on their positions or where they should increase their position. Trend reversal points are a key issue for success, especially in this and similar markets.
HOW IS THE PIVOT POINT CALCULATED?
Pivot Point = PP,
Support Point = S,
It is represented by Point of Resistance = R.
In this case; Initial Support (S1) = (2 x PP) – High
Second Support (S2) = PP – (R1 – S1)
Initial Resistance (R1) = (2 x PP) – Lowest
Second Resistor (R2) = PP + (R1 – S1)
Pivot Point = (Highest Point + Lowest Point + Closing Point) / 3
In a market, price movements will fluctuate between support and resistance points in a certain period of time. However, it is known that the length or shortness of the pivot points will vary continuously due to the volatility of prices. Therefore, instead of manually calculating these constantly changing points one by one, investors can easily calculate using ready-made calculation formulas and make investment decisions accordingly.
Pivot points are similar to Fibonacci levels in many ways, the most important thing that distinguishes them from Fibonacci levels is that Fibonacci levels are relatively subjective. Standard calculations and calculating tools are mostly used when determining pivot points and are especially ideal for short-term traders who want to take advantage of small price movements. As with support and resistance points, investors and market makers use strategies to break or bounce at these levels. Investors and market makers who prefer to use a breakout strategy wait for these levels to be broken to confirm sudden price movements. Pivot points can be evaluated on their own, or they are a very useful technical analysis tool when used in conjunction with other technical tools.