refresher, support/resistance, pivot point

Eric Alyea

Master Sergeant
I think this should go in Beginners Bootcamp, So I will be redundant and reprint it here.
Just so you can't say you haven't been told and we don't help here.

You have to understand Support and Resistance to get a pivot point.

Support and Resistance

For me support and resistance is “Time period relevant”. What I mean by this, is that for each 1min, 15min, 30min, 1hr, 1day, 1month, you will get a different number value.
Here we get in to trending, moving averages and multiple moving averages.
OK if I heard that 3 years ago I would say, “You numbnut’s in poor man’s English, please”.
I had to make up something to memorize what the terms mean.
“Resistance” is when you jump up, the top of your head can only go so high, gravity pulls you back down.
“Support” is after you jumped up your feet hit the ground.
You can pogo stick to different high’s and pogo stick down a hill. Each different jump has it’s own circumstances in time.
Now we get into Fundamental’s vs Technical’s. If you are jumping on your pogo stick and don’t see the pot hole in the ground or the barn on fire, you crash or burn. You can’t trade with your “Ostrich head” in a technical cart.
Then your stupid, you didn’t check your fundamental reports (My workers knew to stop talking when a Dallas traffic report came on the radio, sometimes it was for us some times not).
If you are following a trend, i.e. Pogo sticking with a herd (Fibonacci go to the glossary and read each one, I call it following the band wagon) you may not know that at a certain point the lead guy is going to turn around and say hey you dummies go where you want I’m done and calling it a day. I don’t know why you followed me here, I’m going to the house.
Personally I like to eyeball the charts and use the cross hairs.
On you favorite time period chart take your cross hairs and match the line to eyeball the most tops of the candle bodies are or what ever you use. Write that number down. It will change. Go to a different time chart and do the same, again on other charts.
Use your brain. Sometimes the calculations are the way they are because the “Ubber banker/Troll’s” make them that way.
Figure out a line, back up 3 notches, and go for the conservative sure win.

I disavow all I have said above. You are on your own.

For fun I’ll dig up the numbers for the technical calculations of:
Pivot Point
S1, S2, S3
R1, R2, R3
and research the glossary, back later, I only have so many words I can type a day or explode.
Pivot Points

Pivot points
I was given four websites to reference to understand pivot points. I am listing them in the order I would suggest they be looked at:
Pivot Points - Description of Pivot Points
How floor traders use this trading tool |
What I got from them is this:
We want to understanding price movement on based previous history (technical analysis). Using the time period of our choice e.g. hourly, daily, weekly, monthly etc..
Let’s use daily as a time period example. Finding the High price of the day (H), the Low price of the day (L), the end of day Closing price "C" we can establish a reference equilibrium or Pivot point (P).
(H + L + C) / 3 = P
The sum of the High plus the Low plus the Closing, divided by 3, equals the Pivot Point.
Next we establish reference zones of movement from the "Pivot Point". "Resistance" being the up movement reference and "Support" being the down reference. An easy way to remember this is gravity resists you when jumping up, the ground supports your feet. Two zones in both directions is common, sometimes three. 1st Resistance and Support zones are calculated like this:
(P X 2) - L = R1
Double the Pivot Point (remember it for the next one) minus the Low of the day gives you the 1st Resistance level.
(P X 2) - H = S1
Double the Pivot Point minus the High of the day gives you the 1st Support level.
2nd Resistance and Support zones are calculated like this:
(R1 - S1) + P = R2
Take R1 minus S1 (remember it for the next one), add the Pivot Point to get R2
(R1 - S1) - P = S2
Take R1 minus S1, minus the Pivot Point to get S2
Listening to gossip and their gut instincts the "Big Buck" everyday traders use these numbers and play tug of war over the pivot point between the positive 1st Resistance level and the negative 1st Support level. Think of a football at the (pivot point) 1st and 10 (zone), but we aren’t limited to 10 and it goes in both directions. A funny thing happens when one of the zone lines is crossed. Everybody gets excited and jump up and down. Then the people that were afraid to get on the band wagon feel safer about it and start jumping on because they see others doing it .
An Italian guy named "Fibonacci" figured out the math for the way this commonly happens. The ratio is 1+2=3, 2+3=5, 3+5=8, 5+8=13 and so on. Using this 1,3,5,8,13 jumping on the band wagon effect is predictable and it can go in both directions, i.e. jumping on and starting over with 1 for jumping off.
Back to what happens when a zone line is crossed. If the R1 Resistance line is crossed it becomes the new Support line and the R2 is the new Resistance line. Just the opposite if the S1 Support line is crossed it becomes the new Resistance and the S2 is the new Support.
So the Big Buck guys control a lot of the movement back and forth between the zone lines using math, gossip and gut instinct. When one of the zone lines is crossed other traders start jumping on the band wagon and or jumping back off.
Good trading
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