Using "Pivot Points" to Find Near-Term Technical Support, Resistance Levels By Jim Wyckoff Hello Kitco readers! Many years ago, when I was a market reporter for Futures World News (now called Dow Jones Newswires) I had the job of figuring "Pivot Points" for many of the markets on which I would report. I remember it being a tedious job in my early years as a reporter--before there were computer spreadsheet programs to do the math on figuring the Pivot Points. I also remember bumping up against deadlines, hurriedly punching numbers into my small calculator, on which my big fingers many times missed their mark!
Despite my early dislike for calculating Pivot Points, those figures are a useful method for figuring near-term support and resistance levels in all markets. In fact, some traders use Pivot-Point analysis for entry and exit signals on shorter-term trades. Floor traders, especially, liked to use Pivot Points in their trading methodologies.
They would use the previous trading session's price data to help determine support and resistance levels, including potential entry and exit points on shorter-term trades (day trades). Calculating Pivot Points Here's how you calculate Pivot Points on any market. It's relatively simple. Using previous trading session's price data: Pivot point = High + Low + Close divided by 3. 1st support = Pivot Point x 2, minus the High 2nd support = Trading Range (High minus Low) minus Pivot Point 1st resistance = Pivot Point x 2, minus the Low 2nd resistance = Trading Range (High minus Low) + Pivot Point There are a few slight variances to the above formula, but the above formula is "the standard" and it is the most popular method of calculating Pivot Points. For U.S. Treasury Bond and U.S. Treasury Note futures traders, you will have to take an additional step to break down the prices all the way into 32nds only, which is extra time-consuming--unless you have that extra math programmed into a spreadsheet, such as EXCEL. For example, if the "handle" on T-Bonds is 111, then you have to take 111 x 32. Generally, if prices are trading above the Pivot Point, it's a near-term bullish clue. Price trading below the Pivot Point means the market is in a short-term bearish posture. That's it for now. Next time I'll examine another important topic on your road to more trading success. Stay tuned!
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