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The pivot point is an indicator or technical analysis calculations that are used to determine the general trend of the market across different time frames. The pivot points are the level at which the market movement changes from positive to negative or vice versa. If the market breaks through this area towards the upside, it will be said that this is a positive movement in that Today and it is likely to continue to rise on the other hand, if the price falls below this level, the movement is considered negative and is expected to continue to decline,
it is simply the average high and low of the day, and the closing price from the previous trading day
The pivot points are taken into consideration first during trading because they are a strategy for the price support or resistance point, and the largest price movement is after entering into the transaction in those pivot points. The pivot point is the basis of the indicator. Or resistance and if the price moves through these levels, it lets the trader know that the price is heading in that direction, and that news data can greatly affect the behavior of the price, so be sure to follow the economic calendar.
When the price is at the pivot point, you will have the ability to make the right decision, whether to buy or sell, and pending orders are also placed. In general, if the prices are above the pivot point, this leads to the expectation of a price increase, but if the prices are below the pivot point, this leads to an expectation The pivot points come as an indicator in the technical analysis tools that is calculated using the highest price, the lowest price and the closing price of the financial instrument, and the pivot points can be combined with some other indicators such as, moving averages crosses, Japanese candlestick or the relative strength index.
There are many pivot points and no one is better than the other. It all depends on the knowledge and experience of the trader. Common types of pivot points are:
Classic: This is a simple average of up, down or near and the first and most important level of “S1” support and “R1” resistance is obtained by recognizing the upper and lower halves of the previous trading range.
Standard: Standard points are also referred to as Classic Pivots or Floor Pivot, these two trading terms are often used in interchangeable ways, and these are the “standard” pivot points that are plotted at the default settings of most modern trading terminals.
Woodie: Completely different calculations are used for standard pivot point formulas where Woodie pivot points use an equation that puts additional weight on market closing prices.
Camarilla: Camarilla trading is often likened to Woodies because both systems use closing prices from the previous day to calculate key support or resistance levels and the main difference of the Camarilla system is that its techniques are based on a system that uses a total of 9 price levels.
Fibonacci: Fibonacci techniques involve using Fibonacci studies to determine trend direction and trading position and include some of the most common Fibonacci numbers that traders watch for the 38.2%, 50%, 61.8% and 100% Fibonacci retracement levels.
Demark: Demark points differ from most other points because they are conditional in nature to an outcome based on the relationships between closing and opening prices.
Each type has its own method of calculation and pivot levels can play opposite roles as well, the old resistance will turn into new support once it is breached and vice versa, and the trader can try them in the demo account first.