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Pivot point option trading


One of the main reasons that pivot points are a favored method of prediction among investors is due to the fact that since the information they provide holds true for the entire day, time and effort is not wasted in recalculating. Pivot points can be calculated on a daily, weekly or monthly basis depending on how the information will be used. Additionally, support and resistance levels are quite easy to understand and can be seen visually on a chart, thus investors find pivot points to be easy to learn and useful especially during options with a short time to expiry.

Pivot Point Boundary Strategy which is a guide to trade

When dealing with binary options, our first task is always to get a sense of which direction prices are likely to travel going forward. If we believe prices will increase, we enter into CALL options. If we believe prices will decrease, we enter into PUT options. Pivot Points can be very useful in these forecasts, as the pivot itself marks the first level of support/resistance. Once prices rise above (or move below) this level, we can determine our directional bias. Since the pivot area itself is the most important price region , we can expect prices to move sharply once this level is breached.

Trading Binary Options Using Pivot Points •

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Understanding Pivot Points in Binary Options Trading

a)    This is the only retail platform that allows traders to set their own upper and lower price limits. This allows the trader to work within the confines of his own acceptable trade conditions. Other platforms present the trader with default price limits and this is restrictive.

In this webinar, professional trader and active contributor to , Mark Moskowitz, will discuss Pivot Points and how to use them as a predictive trend indicator. Learn how to use Pivot Points to:

When the needed pivot points are calculated they are then used in order to determine the potential changes in price action. This means that when we calculate the pivot points and when the point ends up being higher than designated pivot point or being in bullish settlement, then the prices are expected to rise higher. On the other hand if the point ends up being under the pivot point, or being in a bearish settlement, in that case one should expect for the prices to fall and move lower.

A second way to trade Pivot points is to fade out the move. This is know as trading a price reversal. As the price reaches R7, R8 or S7, S8 it will become increasingly overbought or oversold.

This is typically a high reward-to-risk trade. The risk is well-defined due to the recent high (or low for a buy).The pivot points in the above examples are calculated using weekly data. The above example shows that from August 66 to 67, R6 held as solid resistance (first circle) at and the RSI divergence suggested that the upside was limited. This suggests that there is an opportunity to go short on a break below R6 with a stop at the recent high and a limit at the pivot point, which is now a support:

As I mentioned earlier, there are lots of ways to trade with pivot points. A more advanced method is to use the cross of two moving averages as a confirmation of a breakout. You can even use combinations of indicators to help you make a decision. It might be the cross of two averages and also MACD must be in buy mode.

Judging Probabilities
The statistics indicate that the calculated pivot points of S6 and R6 are a decent gauge for the actual high and low of the trading day.


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