Pivot Points levels - trade with market makers
- VFX Blog
- For beginners
Opening a deal at the beginning of a new trend, taking the maximum profit from the price movement is the dream of all traders. How to determine if a reversal is true? Perhaps this is only a short-term pullback or correction, which is better to stay out of the market. Any opinion is always subjective, but there are methods how to make money on binary options that maximally remove the human factor, such as Pivot Point levels.
The method has been used since the 30s of the last century, and is equally profitable on any trading asset, regardless of the current market situation. All traders see the same constructions, which further enhance the effect due to small and medium traders - if the binary options strategy shows a continuation of the trend after the level is broken, this will most likely happen, even if there is no reason and large positions have already been closed.
What do Pivot Points levels show?
First, these are support/resistance levels, where there is a temporary balance between the forces of buyers and sellers. Here you can find a large count of Stop Loss and pending orders of market makers to open positions that are opposite to the main trend. In other words, there is increased market interest, special attention to any price movement or auto binary signals.
All modifications of Pivot Points are as objective as possible, they use only "pure" past price data (month, week, day) without any averaging, corrections and smoothing – only the number of periods is adjusted. Even if there are small discrepancies in quotes between brokers, the results should not change significantly. This can be used to check the broker's quotes or free binary options signals: reversal levels are not double counted; your data should not differ from public data by more than +/- 3-5 points.
Calculation of levels
In the classic version, the central (key) level is first considered at OHLC prices (Open/Close/High/Low). Next, the chart plots three resistance levels above and three support levels below the central level:
Pivot values for currency pairs change daily, most traders use the close of the New York trading session at 04:00 EST as their "new day" time. The basic rule works: the larger timeframe, the more significant (strong) levels will be.
You don't need to count manually - use the data for major currency pairs and timeframes on financial websites. Example:
As trade statistics accumulated, the base case was modified. The following calculation methods are now popular:
- Fibonacci. The famous numerical series is used, but it is possible that in addition to the basic values, you will need additional values for the characteristics of the asset and the current volatility. Available in all trading terminals, described in detail in the literature on technical analysis, unlike the "classic" Pivot Point can be used as an independent tool in exact binary options strategy;
- Woodie. In this complex strategy, newer prices are of greater importance (weight). As you move away from the current "weight", prices decrease. We get a more correct assessment of the current situation. Works well with the exponential (EMA) moving average, working according to a similar method;
- Camarilla. The author of the stock trader Nick Scott mainly worked with bonds and stocks. The practice has shown that in volatile Forex, the eight levels of Camarilla also show well the points of opening options and calculating the expiration of binary signals.
The Camarilla technique works well even for speculative tosses, but during periods of strong fundamental news, it fails if the event did not lead to the formation of a new stable trend. On the chart, it looks like a daily candle with large “shadows” and a small “body”, so even the first levels can be very far from the price.
- Demark. An attempt to predict to what levels price may change after a certain number of periods (there is an offset in tinctures relative to the current price). The calculation results can be displayed as levels on the chart or overbought/oversold oscillator in a separate window.
A trader may miss good real binary options signals while waiting for a breakout! It is recommended to check the markup using Fibonacci or classic Pivot - they can give more correct data.
Attention: Pivot Points not recommended being used as the only signal to open a trade. It may not be in the list of binary trading platform indicators, and then you need to use additional charts, such as TradingView in the vfxAlert program. In the Demark settings, there can be a shift forward not only for specified periods but also for hours, as does the Dow Jones columnist Rudolf Axel.
As with any complex technical indicators, the strongest signals appear in the area of the middle (center) line:
- if the market opens higher, then during the day Call-option will be more priority;
- below central level, looking for opportunities for PUT-option;
- when, after opening in the upper zone, the price quickly returns to the central line with a breakdown downwards - there is a high probability of sideways movement (flat), you need to switch to range the strategy for binary option.
Pivot Points works according to the classic technique of breakouts and pullbacks of price zones with several preliminary unsuccessful retests!
- The most important events occur in range S1 – PP - R1. If the dynamics of volumes (even tick) does not show sharp changes, the price will move around levels for a long enough time with a subsequent breakdown in the direction of a new trend;
- Testing or breaking through the support of S2 indicates a rapid movement towards S3 or a gradual return to S1 with several corrections and pullbacks at intermediate levels (if they are on the chart). Where there is a trend, we look at the trading volumes and the confirmation from the binary signal software.
During periods of strong volatility, R3 and S3 show extreme (extreme, control) trading targets - when they are reached, a rebound is more likely than a continuation of the trend. Remember - the levels are the current intraday areas of increased interest, this is where you need to open options if money management allows.
Use with binary options trading signals
On intraday strategies, Pivot Points are usually used as open / expiration points, additional confirmation of the breakout of the boundaries of channel indicators, Moving Average crossing points, and overbought / oversold confirmation.
Looking at the technical and candlestick patterns around the Pivot, they are more important for deciding whether to open a position or not. There is a logical explanation for this - the indicator calculates levels based on the value of the previous day, and this is a fairly large interval for short-term strategies. If you only look at the levels, you can skip the good binary options forex signals!
Most trends end at the R3-S3 lines and the move must be strong enough to break through them. Usually, reversals start at R2-S2, when the market is already completely overbought / oversold, it is recommended to close the current deal if the broker allows. We also look at the position of the levels for the last 2-3 days.
- The main advantage of Pivot Points is the ease of calculation without adjustments and redrawing within the day. But remember: more than three-level retests reduce its accuracy the next day, especially on timeframes less than H1;
- Levels are always taken into account by market makers when planning medium - and long-term trends. They are visible to all traders, which mean that it is easier to lead the "crowd" behind you, purposefully breaking through the level or making a speculative turn, setting large volumes of short-term opposite pending orders. When most small trades end in losses, quickly return to the original movement;
- During the publication of important fundamental news and statistics, we do not open options 30 minutes before the news and 30 minutes after the publication; cautious traders can close current deals. To control the events, we use the economic calendar included in the all best binary signal provider!
- To avoid falling into the trap, professional traders can use an indicator that recalculates the levels after the close of each Forex session. There is an opinion that this way you can additionally confirm the truth of the breakdown/reversal from the pivot levels.
- As always, it is recommended to analyze several timeframes at once: the combinations M-M15-M30 and H1-H4 work well. If there are several levels in the same zone, this amplifies the signal.