Sunday, August 8, 2010

Market Lesson – Pivot Points

Pivot points are used by market makers, individual investors, and professional traders. A pivot points are used to help investors find entry points of stocks. They are especially convenient for short-term traders who are interested in taking advantage of small price moves or longer term investors who are looking for long term price moves.

A pivot point is the buy point that represents the previous high or resistance area in a stocks price. A move above the pivot point usually occurs at a new price high. Many smart investors use the pivot point as a main entry point being that breakouts usually occur above old resistance levels. When looking for an entry point investors should always focus on the pivot point. When stocks move above the pivot point they are considered bullish, but when they move below they are considered bearish.

Pivot points don’t always work on every trade, but the main tool that does is patience. Time and time again investors that attempt to buy stocks before they move above their pivot points are usually hurt in the process and end up taking huge loses. Sometimes stocks tend to run up and touch the pivot point and reverse only to pullback to previous price lows. Investors must learn to use pivot points along with moving averages, candlestick charts, stochastics as well as other techniques effectively to become better traders.

By: Marlin Rolle
*** Please have a look at the stock chart example below ***

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