Using Pivots as Secondary Support & Resistance

Basically, there are three major forms of support and resistance which can be represented specifically by way of horizontal lines drawn from left to right, all of which serve the same basic functions. They include: Old Highs & Lows, Fibonacci retracements and extensions, and pivots.

While it may seem to be a minor technical detail, it may be worth knowing how pivots are actually calculated. Firstly, we input the High/Low/Close (HLC) numbers for the last completed trading session into the calculation of the Central Pivot (CP) value for the following session. Ideally, the calculation is automated, but such is not always the case. This is why it might be handy to know how to do the calculation yourself.

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Identifying Support/Resistance From Old Highs & Lows

Old Highs & Lows can be used to represent a simple form of horizontal support and resistance based on action taking place in the background. Support can be simply defined as a level at which a down move was interrupted or reversed, at least temporarily; while resistance simply inverts that idea - an up move that was interrupted or reversed. When we are trading in the live markets, we often pay attention to the concepts of support and resistance such as pivots and trendlines which relate directly to the current trading environment. However, it is important to remember that the market has a 'memory', i.e. it pays attention to levels in the past where a reaction of some kind has occurred.

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