Working Money: What Are Pivots? by Dennis D. Peterson More than just an alternative to indicators, pivots can be used to better understand market behavior. The appearance of pivots on a chart suggests the market has made a decision about price action. Pivots are points at which the price changes direction. In many ways, they are more useful than indicators are. You will also find that pivots are the basis of many technical articles, and frequently part of trading strategies. Simply put, pivots are turning points (Figure 1). If the open-high-low-close (OHLC) bars before and after a bar have lows above the low of the bar, then the bar is a pivot low. If the OHLC bars before and after a bar have lows below the low of the bar, then the bar is a pivot high. I prefer to see the highs or lows preceding the bar clearly indicate a trend or swing. Generally, I wait till at least three bars appear after the candidate pivot point before I determine a bar is a pivot; I don’t want to get caught with a third-day reversal (what that is, I’ll explain shortly). |
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