Traders Toolbox Lesson 4: How to profit and use pivot areas effectively

Over the years, I have found certain areas of support and resistance to be especially effective in trend analysis. These special levels have been given the term pivot areas. These are areas which, once reached, act like a pivot man in basketball. The pivot man is faced with the choice of which direction to send the play; once the decision has been made and the ball has been passed, the play generally continues in that direction. When a market reaches a pivot area, a decision needs to be made to go higher or lower, and once a decisive close has been made away from or beyond the pivot area, the direction is likely to continue.

A good example of a pivot area is the 5040 level on the weekly hog chart. When the market has approached this level, it has either clearly turned or definitely con- tinued the existing trend with very little consolidation. Other examples include the 550 level in soybeans, 500 area in silver and sugar, 5500 area in cattle, 1500 level in soybean oil, the 80-00 area in Treasury bonds and the 205 level in soy- bean meal. Many markets exhibit pivot areas especially well on Gann (contract specific continuation) charts.

14 thoughts on “Traders Toolbox Lesson 4: How to profit and use pivot areas effectively

  1. Thanks Kathy and other submitters. So right Frank - I love it when You're so right but sooo wrong - stops can be such a pain when they become the Pivot.

  2. traders floor pivots work because lots of traders use them, especialy for forex & futures. I have found that yesterdays hi,low,& close are very effective pivots when day trading stocks. check it out. BEST REGARDS AND TRADING, DENNY

  3. In my humble opinion, I'd like to throw this out there. To become a successful trader, you need to focus on how to "lose a trade", rather than profit from one. How you handle a troubled trade is the key to success. A winning trade is easy, we can all attest to that. Its the losers that tear us down. When you prepare your strategy, you must anticipate the worst outcome, while planning for the profitable one. If you are experiencing "panick" during the trade, as we all have, you've entered unprepared. The best way to be a winner, is to be a better loser.

  4. Geoff,

    If you google pivot point calculators you can down load a free one. Then you just put in the high, low & close and it calculates it all for you

  5. And to answer your question on how does one know......I can only say that one never knows for certain,but if you joined INO-TV,a Marketclub service,you could start a long and fascinating journey in the art of technical analysis.The many guest speakers on INO-TV are world class traders who can teach you the ropes......Good Luck!

  6. Hello Amit....which stock market were you watching today ? The Dow Jones opened a hair under yesterday's close.....went down a little bit,and rallied like a raging bull ! Now,the question is : is this a bottom, or just a bounce from a very oversold condition.....time will tell.We should see upside continuation tomorrow,but be ready to take whatever profits you made regards

  7. i want ask one thing as tody market was falling 300 point from open that mean trend is down but is possible to know that market will act only this way or it can come up in one day if so ....then how can one know ? where the market will go if market come dwon

  8. Some people can give good advice and themselves not even profit from it.....that's exactly what happened to me today.I'm talking about DUG,I was long and had my stop-loss in place.....the stock gapped up this morning and immediately had a sharp downward reversal.Nevertheless,the reversal never violated my stoploss,yet I panicked and got out of the trade,only to see it make a hefty move up for the day......that was mistake #1.Mistake #2 was I then focused on a stock that was not part of my game-plan,and worse still,I tried to short it knowing full-well that I was going against a strong uptrend......ofcourse,I got burnt!And finally,as if that wasn't enough I was stubborn and kept insisting and convincing myself that it should go down so I kept putting in sell-short orders,only to be stop out countless times.I share this trading episode with you to remind myself that a trader can be spot-on with direction, and in this case timing and still not make a dime......PLAN YOUR TRADES,AND WORK YOUR PLAN....

  9. Common Pivot points Strategy's for Daytraders on the Forex Market.
    1. Wait for the prices to reach the Support (Resistance),
    2. Look for reversal patterns,
    3. And then go long (short) with a tight stop and a decent target (or trailing stop).

    There are many trading techniques and strategies associated with pivot levels. Here are some:
    Be long above the pivot point and short below it. (directional bias)
    Short at each resistance level and buy at each support level. (entries)
    Take partial profits at each resistance/support level. (targets)
    Place stops above/below resistance/support. (stops)

    Pivot Formula
    P= ( H + C + L ) / 3

    Res1= 2 * P - L | normal trading range
    Sup1= 2 * P - H | for the next period

    Res2= P + (Res1-Sup1) | extreme trading range
    Sup2= P - (Res1-Sup1) |

    Res3= H + 2*(P-L)
    Sup3= L - 2*(H-P)

  10. Thanks for a quick reply!! QUESTION What numbers should I look for on a company's balance sheet or financial statement that says the stock is selling 'cheap'?? Need to know how to screen for
    good companies that have solid fundementals but
    have been hurt by the bear momentum.

  11. Adam - I'm not sure why you would include a response from Adewoyin Temitayo which is incoherent and extremely poorly written.

    Other than that, I enjoy your educational blogs very much.



    It was I who allowed the comment by Temitayo to go through. We have a lot of international visitors to our blog. Although the translations are sometimes a little off, I want to include everyone's views and contributions. I have edited it a bit, but I will do a better job of cleaning up the comments.

    Thank for the comment.


    Lindsay Thompson
    Director of New Business Development &

  12. I really appreciate this enlightenment. A lot of traders trade without observing this powerful point. Some don't even know it works. I this will sort of enlighten them.

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