| Pivot Point Analysis |
| Written by Don Dawson |
| Monday, 16 February 2009 00:00 |
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Pivot Point analysis originated many years ago in the grain pits. Before the Pivots were developed, the only thing that pit traders could reference to trade off of was yesterday’s high, low and close. Pivot Point analysis was designed to give the trader a reference of where today’s prices were in relation to yesterday’s prices. Since traders were not allowed to have electronic devices in the pits during trading hours, this was a big help. Of course, back then, even the smallest electronic device took a table to rest on. They were nothing like today’s microelectronic technology. The Pivot Point numbers were static and effective for most of the trading day, if not all of it. The numbers worked so well when they first came out. Then, like many trading ideas in the markets, everybody started using them and they lost some of their strength. Also, people started using them thinking that they were projecting the "exact" high or low of the day and the study was used improperly. This caused more opportunities for floor traders to fade these levels where the public bought or sold blindly on the projected numbers.ÂYou see, back then there were only a handful of technical studies to look at and there were lots of traders. Today, we literally have hundreds of studies to look at. For this reason, I believe that some of the more traditional studies are starting to work well again. With much more variety to trade from, the idea of too many people using one tool is not as likely. This is an excerpt from Mar 2009 issue of Trader's Journal. To view the complete article, please click here.
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