Pivot points, a technique developed by floor traders, help us see where the price is relative to previous market action.
As a definition, a pivot point is a turning point or condition. The same applies to the Forex market, the pivot point is a level in which the sentiment of the market changes from “bull” to “bear” or vice versa. If the market breaks this level up, then the sentiment is said to be a bull market and it is likely to continue its way up, on the other hand, if the market breaks this level down, then the sentiment is bear, and it is expected to continue its way down. Also at this level, the market is expected to have some kind of support/resistance, and if price can’t break the pivot point, a possible bounce from it is plausible.
Pivot points work best on highly liquid markets, like the spot currency market, but they can also be used in other markets as well.
In a few words, pivot point is a level in which the sentiment of traders and investors changes from bull to bear or vice versa.
Why PP work?
They work simply because many individual traders and investors use and trust them, as well as bank and institutional traders. It is known to every trader that the pivot point is an important measure of strength and weakness of any market.
Calculating pivot points
There are several ways to arrive to the Pivot point. The method we found to have the most accurate results is calculated by taking the average of the high, low and close of a previous period (or session).
Pivot point (PP) = (High + Low + Close) / 3
Take for instance the following EUR/USD information from the previous session:
The PP would be,
PP = (1.2474 + 1.2376 + 1.2458) / 3 = 1.2439
What does this number tell us?
It simply tells us that if the market is trading above 1.2439, Bulls are winning the battle pushing the prices higher. And if the market is trading below this 1.2439 the bears are winning the battle pulling prices lower. On both cases this condition is likely to sustain until the next session.
Since the Forex market is a 24hr market (no close or open from day to day) there is a eternal battle on deciding at white time we should take the open, close, high and low from each session. From our point of view, the times that produce more accurate predictions is taking the open at 00:00 GMT and the close at 23:59 GMT.
Besides the calculation of the PP, there are other support and resistance levels that are calculated taking the PP as a reference.
Support 1 (S1) = (PP * 2) – H
Resistance 1 (R1) = (PP * 2) - L
Support 2 (S2) = PP – (R1 – S1)
Resistance 2 (R2) = PP + (R1 – S1)
Where , H is the High of the previous period and L is the low of the previous period
Continuing with the example above, PP = 1.2439
S1 = (1.2439 * 2) - 1.2474 = 1.2404
R1 = (1.2439 * 2) – 1.2376 = 1.2502
R2 = 1.2439 + (1.2636 – 1.2537) = 1.2537
S2 = 1.2439 – (1.2636 – 1.2537) = 1.2537
These levels are supposed to mark support and resistance levels for the current session.
On the example above, the PP was calculated using information of the previous session (previous day.) This way we could see possible intraday resistance and support levels. But it can also be calculated using the previous weekly or monthly data to determine such levels. By doing so we are able to see the sentiment over longer periods of time. Also we can see possible levels that might offer support and resistance throughout the week or month. Calculating the Pivot point in a weekly or monthly basis is mostly used by long term traders, but it can also be used by short time traders, it gives us a good idea about the longer term trend.
S1, S2, R1 AND R2...? An Objective Alternative
As already stated, the pivot point zone is a well-known technique and it works simply because many traders and investors use and trust it. But what about the other support and resistance zones (S1, S2, R1 and R2,) to forecast a support or resistance level with some mathematical formula is somehow subjective. It is hard to rely on them blindly just because the formula popped out that level. For this reason, we have created an alternative way to map our time frame, simpler but more objective and effective.
We calculate the pivot point as showed before. But our support and resistance levels are drawn in a different way. We take the previous session high and low, and draw those levels on today’s chart. The same is done with the session before the previous session. So, we will have our PP and four more important levels drawn in our chart.
LOPS1, low of the previous session.
HOPS1, high of the previous session.
LOPS2, low of the session before the previous session.
HOPS2, high of the session before the previous session.
PP, pivot point.
These levels will tell us the strength of the market at any given moment. If the market is trading above the PP, then the market is considered in a possible uptrend. If the market is trading above HOPS1 or HOPS2, then the market is in an uptrend, and we only take long positions. If the market is trading below the PP then the market is considered in a possible downtrend. If the market is trading below LOPS1 or LOPS2, then the market is in a downtrend, and we should only consider short trades.
The psychology behind this approach is simple. We know that for some reason the market stopped there from going higher/lower the previous session, or the session before that. We don’t know the reason, and we don’t need to know it. We only know the fact: the market reversed at that level. We also know that traders and investors have memories, they do remember that the price stopped there before, and the odds are that the market reverses from there again (maybe because the same reason, and maybe not) or at least find some support or resistance at these levels.
What is important about his approach is that support and resistance levels are measured objectively; they aren’t just a level derived from a mathematical formula, the price reversed there before so these levels have a higher probability of being effective.
Our mapping method works on both market conditions, when trending and on sideways conditions. In a trending market, it helps us determine the strength of the trend and trade off important levels. On sideways markets it shows us possible reversal levels.
How we use our mapping method?
We at StraightForex use the mapping method in three different ways: as a trend identification (measure of the strength of the trend), a trading system using important levels with price behavior as a trading signal and to set the risk reward ratio (RR) of any given trade based on where the is the market relative to the previous session.
In recent years there has been a huge rise in the number of robots claiming they will help you enjoy financial freedom with no effort and most fail miserably to live up to the hype. Let's get rid of the bulk of them first.
1. Does the Track Record look to Good to be True?
You see them all the time, pay a couple of hundred of dollars and get a track record that is better than the worlds top fund managers. If you see ones with these statements then be very wary of them.
- Double your Profits every month
- Trade with 90% accuracy or more
- Draw downs of less than 1%
- Losing periods of under a week
This is not the reality of Forex trading!
Normally these systems produce back tests and simulations, knowing the closing prices, or present testimonials and trading results that are not independently verified.
The top fund managers wouldn't be earning millions of dollars in annual salaries if the Robots worked, they would be out of there jobs and join the world enjoying financial freedom, trading Forex robots for the price of a night out.
Now you can win but look for some evidence of real gains, independently monitored and look for a track record of a few years in length
2. What to Look for in a Real Track Record
So what gains can you expect to see?
The best will do compound growth of around 30 - 100% per annum and the higher the gain, the bigger the draw down. You can normally expect a peak to valley drawdown of 20 - 50%, depending on the risk profile of the system. A typical drawdown will be a few weeks to a few months.
The gains are excellent - but you have to ride out short term losses, all the best traders do and you will as well.
3. Know the Logic
Never buy a black box system where the logic is not revealed. You need to know the logic to have confidence, to follow the system with discipline.
4. Support and Ease of Use
Look for good, prompt support from the vendor. Dry run the system to make sure everything is in place before you trade real money, don't just jump in, make sure you are prepared and are confident in operating the system.
Long Term Profits in 30 Minutes a day or less
The best robots will give you great long term profits but you have to have the confidence to apply them with discipline, as you need to take short term losses to make long term gains.
If you do the above, you could soon be making great long term gains with an automated Forex robot and enjoying currency trading success.
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Can you really get FREE web hosting?
Yes, there are hundreds of free hosting web sites, as far as not having to pay any money to have your website hosted. Generally they either cost you in time, web hosting restrictions, or modifying your free web pages by adding popups, banners, or other adverts. When looking for free web hosting (especially on search engines), you should beware that there are also a large number of commercial web hosts that claim to offer free hosting services, but those often have a catch, such as paying an excessive amount for a domain name or other service, and therefore aren't really free. The free free hosting guide below will give you some tips for finding the right free webhosting comapny for you.
How do the free web hosts make money?
The free website hosts often make money in other ways, such as putting banners, popups, or popunders ads on your free webpages. Some free web hosting companies do not put ads on your site, but require you as the webmaster to click on banners in their control panel or signup process, or just display banners in the file manager in hopes you will click them. Some lure visitors with free hosting in hopes you will upgrade and pay for advanced features. A few send you occasional emails with ads, or may even sell your email address. A new method that is becoming popular is requiring a certain number of "quality" forum posting, usually as a means of getting free content for them and thereby being able to display more ads to their website visitors.
Are free web hosts reliable?
Generally no, although there are a few exceptions. If the free host is making money from banner ads or other revenue sources directly from the free hosting service, then they likely will stay in business, provided someone doesn't abuse their web hosting server with spam, hacking, etc., as often happens to new free web hosting companies with liberal signup policies. If the freehost accepts just anyone, especially with an automated instant activation and it offers features such as PHP or CGI, then some users invariably try to find ways to abuse it, which can cause the free server to have a lot of downtime or the free web server to be slow. It is best if you choose a very selective free hoster which only accepts quality sites (assuming you have one).
Uses for free webspace
Free web hosting is not recommended for businesses unless you can get domain hosting from an ad-free host that is very selective. Other reasons for using free hosting websites would be to learn the basics of website hosting, have a personal website with pictures of your family or whatever, a doorway page to another web site of yours, or to try scripts you have developed on different web hosting environments.
How to find the right free web hosting site
The best place to search for free webhosting is on a free webspace directory website (i.e. a web site which specializes in listing only free web hosting providers). There are some which add new free hosts pretty much every week (and if it is updated often, has usually had to delete about as many). There are also many which almost never update their web site, and a huge percent of their links and info are outdated. Unfortunately that includes most of the directories that were the best several years ago. The problem is free hosts change so often, and most fold up in less than a year (often even after only a day or two), that it is hard to keep such a freehosting directory up-to-date. The most recommended free web space directory is Free Web Hosting (http://www.free-webhosts.com/), which has a detailed list of over 500 free web hosting providers with user reviews, ratings, and free hosting searchable database. It is updated daily, and the advanced free web hosting search has 42 options, helping you to find the free hosting package with all the features you need, such as CGI, PHP, MySQL, ASP, SSI, Ruby on Rails, FrontPage server extensions, and even free cpanel web hosting.
For a smaller, more selective list of the best free hosts, there are also these free webspace hosting directories:
Best Free Webspace (http://www.100-Best-Free-Webspace.com/)
Free Hosting (http://www.Absolutely-Free-Hosting.com/)
Free Webspace (http://www.free-webspace.org/)
Other (usually less useful) resources include subcategories of freebies sites, search engines and directories, and forums. Your ISP might also supply you with free webhosting.
Hints for finding the best free web hosting service
Generally it is best not to choose a free hosting package with more features than you need, and also check to see if the company somehow receives revenue from the free hosting itself to keep it in business. As already mentioned, it is best to try to get accepted to a more selective free host if possible. Look at other sites hosted there to see what kind of ads are on your site, and the server speed (keep in mind newer hosts will be faster at first). Read the Terms of Service (TOS) and host features to make sure it has enough bandwidth for your site, large webspace and file size limit, and any scripting options you might need. Read free webspace reviews and ratings by other users on free hosting directories. If you don't have your own domain name, you might want to use a free URL forwarding service so you can change your site's host if needed.
Recommended free web hosts
It would be awfully hard to recommend any free web space host and someone not like it, as different people need different web hosting features and have different priorities, and the webhosting quality may change over time. Also some people want free domain hosting (you own the domain), and others might not be able to buy a domain name. Here are some of the most recommended free web hosts, and their main features.
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Yahoo Geocities (http://geocities.yahoo.com/home/) is controversial. Many people hate the ads they put on your site or its other limitations, but it is one of the oldest and most reliable free web hosts. Your URL looks like http://www.geocities.com/you . They give you 15 MB webspace, file manager and editor, web-based Email, and statistics. The bandwidth limit is 3 GB/month, and the file size limit is 5 MB. You can upload several file types such as RealAudio, RealVideo, Flash, MP3, and Java, but other scripting is not supported.
source : Free-webhosts
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