What are Pivot points?
Pivot point indicates support and resistance lines of current trading day by applying certain formula in consideration of previous trading day Close, High and Low prices.
Through many years traders have used Pivot points to confirm and conjecture future prices within that day. Normally 3 support and resistance lines can be determined.
There are diverse Pivot point types with different obtaining methods; Classic, Fibonacci, Woodie’s, Camarilla and DeMark’s.
Close price has most important effect on Woodie’s model of Pivot points. DeMark’s model uses relationship between Close and Open price prices.
Camarilla identifies more support and resistance level from given formulas in which farther support and resistance has more effects on market trend.
Floor Pivot point uses support and resistance level as well as other inputs to determine next support or resistance level.
Pivot points trading strategy
There are various trading methods that utilize Pivot Points
Overlapped Pivot Levels: If the levels of different Pivot Points overlap each other, strong support/resistance levels form, on which reversal candlestick patterns show an appropriate spot to order a trade
Pivot with Divergence/Convergence: Pivot Points, which are near current price, have powerful effect on market price direction if Overbought/Oversold condition appears and indicator/oscillator level is crossed by trend line.