Daily, Weekly And Monthly Pivot Points-the Importance Of Confluence!

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You must have often heard market analysts talking about the daily, weekly and monthly support and resistance levels. How do these analysts calculate these daily, weekly and monthly support and resistance levels? Most are using Daily, Weekly, and Monthly Pivot Point numbers!

Difference between a winning trader and a losing trader is what they do with the price data they have. Pivot Point can give you the edge as they are considered to be a leading indicator unlike most other technical indicators that are lagging in nature. Read the first article on Pivot Point Analysis before you continue with this one.

Many new traders get confused by pivot point analysis. The reason is simple. Most get confused by the information overload when they look at the seven different support and resistance levels that are provided by the pivot point analysis for each time frame. So, how to simplify and remove the information overload. Read on to know how!

Pivot Point Analysis provides you with three resistance levels R3, R2, and R1 and three support levels, S1, S2,and S3 plus the Pivot Point P. Let's simplify. In a ranging or a consolidating market, R1 and S1 are the most important levels to watch. In a bullish up trending market, S1 and R2 are the levels that you should watch while in a bearish down trending market, S2 and R1 are the important levels that you should monitor. The potential range for the trading session will be this S2 and R1 in a bearish market.

Now, why pivot points are so important is that many institutional and bank traders use them in their analysis. Many banks and big institutions take positions based on the pivot point levels. So, you simply cannot ignore these levels as markets often react to them.

When several pivot points line up, there is higher probability of a strong reaction from the market at these numbers. One reason for using the daily, weekly and the monthly pivot point levels is that it reflects the behavior of three different groups of traders. These three important group of traders are the day traders, the swing traders and the long term position traders who are generally the hedge funds.

So, if you see the daily, weekly or the monthly pivot resistance or support levels congesting into a narrow zone, this should be noted. Longer term numbers should be watched for clues that the current trend could be exhausted and potentially reverse itself. When you find the three pivot levels on the daily, weekly and the monthly chart lining up nicely, consider it as a signal that the market is going to react strongly around this level.


About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. Learn this powerful Fibonacci Retracement method FREE that pulls 500+ pips per trade. Try these Forex Signals by two top gun traders!



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