Here we’ll explain more about pivot trading strategy that you can use for your binary options trading.
A pivot point is a trading indicator which gauges, or rather measure, the trends happening on the market for a designated time frame. A pivot point may be calculated by including the daily high, daily low and daily close taken from a previous session. If we were looking at a daily chart, the calculated interval would be the previous day. In a 4 hours chart, the calculated interval would be the previous 4 hours. Depending on the performances of the market you may conclude it was a bullish settlement, or ended up above the pivot point, or bearish, meaning ending up below the pivot point.
Identifying Important Changes in Price Action
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.
This is very important when trading because these pivot points may prove to be valuable when calculating where the prices were going to go in the future. Carefully calculating and providing the correct assumptions will be a very formidable tool for you to have when trading binary options trade, because when your calculations prove to be correct then you stand to make a lot of money for short periods.
Support and Resistance Levels
Pivot points are actually most useful when calculating or rather defining support and resistance levels. The support and resistance levels are usually calculated by using the difference between the high and low of the previous session and the price level of the pivot. This is of course calculated by using the previous session and calculating them for the determined period which you have set (hour, week, month) in order to get the results for the future and use them to your advantage. If the result happens to be that the prices have broken through one of these areas, whether it is upwards od downwards, then the next levels of support and resistance can only be calculated by using the price distance from the high and low which we can use from the previous session. If an upside break occurs this would mean that the first support of resistance will target the secondary support and resistance levels.
Support and resistance levels are a major tool used in determining various market trades. Although their role may be interchangeable, and pivot points may be used to calculate many different analysis on the market like determining whether or not the price level is approached in a down-trending or an up-trending market, it comes in handy when using it to determine your binary option trading and will give you a certain advantage.
Using This Information When Trading
In order to trade properly and calculate the exact frame of the pivot points you need to use a trading station. With a modern trading station platform your calculus will be exact and perfect, everything will be exactly marked out for you which you will be able to see without any problems. These charts are made to be as easy to use as possible and make a lot of difference when trading binary options. You just need to enter the needed info in it and everything will be calculated and clearly marked for you to use. Upon calculating the needed levels you may use them in trading with binary options.
Trading with binary options would mean for you to guess where the market is going to go, will the price of a given asset increase, or a need to enter the CALL option, of will the value of the asset decrease in a given period, which will require for you to enter the PUT option. Using the pivot points would mean the pivot will mark the first level of support and resistance. We can determine our direction bias once we have started trading and the market goes above or below the support and resistance levels. Once this level is breached we shall expect a sharp change in the prices and will be able to determine the needed data.
In that case, when a bullish settlement appears, we are then looking for the prices to rise above the pivot point and we also expect them to rise further. The prices will then reach the next resistance area. At this moment the trade is closed and the profits are taken. When bearish settlements occur, the prices will fall below the pivot point and will continue on also to move even lower. As was the situation with the bullish, so will it now by moving downward the prices reach the next designated area of support. It will result in the trade being exited.
Generally speaking pivot points represent a great advantage for all binary options traders. Via the use of a modern trading platform one can very easily determine the needed info and let the platform crunch the numbers and help you whether to choose the PUT or CALL options. An important note is that pivot points are not long term indicators and the data received via them is subject to change between sessions. Use it only as a short term indicator and crunch the numbers again between sessions each time. If you do not use it for its designated time frame, you may risk for the prediction to become less reliable.