Analysts in the industry use pivot points, which represent levels of resistance/support, to determine the possibility of price changes over time. Originally, this technique was restricted to floor traders defining prime areas to watch during the trading day. However, over time, the technique has expanded and is currently used as an indicator for bolstering online trading performance.
Explaining Pivot Points
Initially, it represented the mean value taken between the price at its lowest, highest, and close price over a time frame. This system was built on and used to determine support or resistance within the market. The way it is understood today, is that if the price shoots over the pivot point, it was a signal of a bullish market. Meanwhile, if the price dropped below, it was a bearish sign. Based on this movement, traders in South Africa closely analyze the platform for further developments.
Developments Over Time
These are utilized by technical analysts to build higher forms of market evaluation and statistics. For example, a new concept known as Fibonacci Pivot Points makes use of the golden ratio to assert stronger analysis of the future of the market.
Another style, known as the ‘Demark Pivot Points style’ further built on the concept. In this style of analysis, calculations are made upon the opening price with respect to the closing price for the period. Unique to this style is that it uses only one level of support and resistance, unlike others that usually utilize more.
Profiting from Pivot Points
They can be used to boost trading accuracy, as they represent areas of resistance or support. As a result, they set the precedent for the movement of prices by indicating when the trade is going higher or lower. As mentioned above, a price moving above its pivot point is to be taken as a bullish symbol. One that moves below is a bearish one. Along with this, the areas of support/resistance established through these points should be looked at as vital regions for a trader to keep track off.
When using pivot points, analysts need to keep in mind that they represent a more restricted time period. On the other hand, when considering the market, traders need to expand beyond just one time period for a more stable view.
Conclusion
Using pivot points when trading has become a strong strategy based on technical analysis. However, it takes robust knowledge of Forex trading in South Africa, as well as experience and skill, to fully utilize this technique to make gains in the market. WesternFX is a leading brokerage in this region, one that has assisted traders across eighteen countries. We have a strong grasp over this art and can guide you through it too. Call us now for professional expertise on the subject.
