Introduction
As a trader, it is essential to understand the concept of pivoting point in trading. The term pivoting point refers to a price level, which is used to identify the direction of the market. It is a technical analysis tool that is widely used by traders to determine the support and resistance levels of a particular asset or security.
What is Pivoting Point?
A pivoting point is a technical analysis indicator that is used to determine the overall trend of the market. It is a price level, which is calculated by taking the average of the high, low, and closing prices of a particular asset or security. The pivoting point is then used to identify the support and resistance levels of the market.
How is Pivoting Point Calculated?
The pivoting point is calculated by taking the average of the high, low, and closing prices of the previous trading day. The formula for calculating the pivoting point is as follows: Pivoting Point = (High + Low + Close) / 3 The support and resistance levels are then calculated based on the pivoting point.
Uses of Pivoting Point in Trading
Determining Support and Resistance Levels
The primary use of the pivoting point is to determine the support and resistance levels of a particular asset or security. The support level is the price at which the market is expected to stop falling and start rising, while the resistance level is the price at which the market is expected to stop rising and start falling.
Identifying Market Trends
Another use of the pivoting point is to identify the overall trend of the market. If the market is trading above the pivoting point, it is considered to be in an uptrend, while if the market is trading below the pivoting point, it is considered to be in a downtrend.
Trading Strategies using Pivoting Point
There are several trading strategies that can be used with the pivoting point indicator. Some of these include: – Pivot Point Breakout Strategy – Pivot Point Bounce Strategy – Pivot Point Reversal Strategy
Conclusion
In conclusion, the pivoting point is a crucial technical analysis tool that is widely used by traders to determine the direction of the market. It is a price level, which is calculated by taking the average of the high, low, and closing prices of a particular asset or security. The pivoting point is then used to identify the support and resistance levels of the market, as well as to determine the overall trend of the market. By understanding the concept of the pivoting point, traders can develop effective trading strategies and make informed trading decisions.
