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G'day traders and welcome to our free stuff video.
I'm glad you can join us. What I'm going to show you today is something
we really watch in the market every single day.
Now, what you are looking at, at the moment are support and resistance levels.
These support and resistance are drawn from something that is called in most of your charting
programs, is also called the pivots. These are the pivot levels that we really
want to keep an eye on during the trading day.
Even during the pre-market, they are very, very important to watch these levels.
So basically, what we have is a central pivot level which is marked in the red line just
here. And then above this level, we have resistance
levels and below the pivot, we have support levels.
So you can extend these to one, two, three, four and even higher.
But we want to really want to focus on what is happening in the price action for that
particular day. We are looking at a 16 and a quarter point
day here so, this happens to be Monday the 3rd of December.
What I want to show you more so is how important these levels are and how they're respected
during the trading day more importantly. What we want to do and take advantage of and
how this can actually help us in trading. You could possibly use it as a trading system
on it's own as a method on it's own. For example if you wanted to use a resistance
level to short off and then possibly take profits off at that level it's probably a
very smart idea to do so. Unlike if it actually broke down you can probably
short it again and take profit down at these levels.
But what we want to do mainly and what we want to focus on, if you can incorporate this
in your current method it's very important to draw these support and resistance levels.
Why I say that is because if you've got an intention to say okay we are looking at the
morning here and it's been shorting quite considerably, I might want to take the next
short into this level. The problem is, if you are expecting to short
at this level here and you're not aware that the pivot level is right here, you may more
than likely, you will actually find there will be some pressure here, they'll be some
sort of hurdle that you would need to really get across and if the pivots aren't drawn
up on your charts, you will see the price bounce and bounce and you're thinking what's
going on, the price has been shorting all morning, why is it struggling at this particular
level?
Drawing the pivots will more than likely just make you aware of where this line is and it
may avoid you taking that short trade because you know you are going to suffer some kind
of struggle at that level. Now, as soon as price has broken through,
it has now created resistance because it's above us. This line in now above price.
So again, if you were looking at buying into this level, you would face some issues.
That is why this has created a very, very strong force. It has created a hurdle of some
sort that we need to get through, and as soon as it breaks through, it's shown a little
bit of freedom and again bounced and then couldn't quite bounce through and then broken
through again. So that is why these levels become important
throughout the trading day. I will show you in a moment how we actually
draw them up, but, I just need to show you the importance of how critical the pivots
are. Now more importantly, how many people use
these pivot lines? Well, if they are showing significance in
price reaction, wouldn't you want to know where these lines and support and resistance
are? And that's why I use it to help me in my current
method. I don't trade the pivot on it's own.
I wouldn't particularly sell at this level them buy back my position down here.
It would make for a very good target more so. So if you're looking at taking profits,
it will probably help you with your trading method which is advisable when you really
want to know where the resistance and support levels are.
But more importantly, we just want to know that they are there because we know that there
are a group of traders watching these levels every single day.
We just want to know that they are there. That's what we want. We want it to help us
with producing lines and levels in the market where we want to know where they are.
A lot of people don't actually know where the pivots are and they may think it's just
a fad, not many people are watching them. Well, what I have actually found over the
last 3 or 4 years of trading, these levels do create some significant support and resistance
levels. So we just want to know where they are.
Do I trade through them? Occasionally, if I've got a target; just say
I have entered as a short through here and I have got a target down below. I know the
pivot is there and I know I'm going to struggle through that level.
Do I effectively take profit at the end? Well, you can and it will eventually work
it's way through. But I know I may have to sit through the trade
for one or two hours before it actually broke through.
So that's the importance of it. Next, I just want to go through how we actually
draw them up. But more importantly this is a 16 and a quarter
point day there and it shows how significant these levels are actually traded.
Alright, so we'll get rid of that drawing and we'll show you how we actually draw them
up. So, we'll have a look at the previous trading
day. So what we are looking at here at the moment
is Friday the 30th of November. So it happens to be over a weekend.
That was the previous trading day. We need to know the high, the low and the
close of the day. So we'll come up over here to the support
and resistance tab. On your charting program, it may be called
the pivots. So from the high, to the low to the close.
Now this needs a little bit of practice. You need to try it out a few times just to get
the hang of things. So it's pretty straight forward, that's all
you need to do. So just recognize the close of the day.
The close of this day is at 4:15 at fifteen fifties.
And extend it over as far as you can to the right.
Alright, that's it. So, we can already see here that the pre-market
levels have treated these levels quite importantly as well.
So there has been some pretty significant levels in the pre-market.
We'll bring our drawing back over. We'll open it up.
So basically that is how I have drawn it. The previous price action.
That is what you really want to see. So, does it use these levels every single
day? Not everyday but we want to know where these
levels are to create how important they are. We want to see if price is actually respecting
these levels more so. So there you go.
That's the basics of the pivot levels. Now how can you use them more so just wrapping
up. We want to use them to be aware where these
levels are before we take a trade. So if you are looking at buying into this
level, we want to know that you may be facing some kind of resistance if you're looking
at buying. Can you still buy through this level?
Of course you can, although just expect there to be some trouble when the pivot reaches
this level. What's actually happening is there are traders
that will be taking profits or taking new positions at these levels.
Very common. You can see so in through here.
It hasn't come right to the tick but we want to treat these levels as a range.
Not as a particular price level. Just bare that in mind as you're trading.
But more so, importantly. We want to know where these levels are ahead
of time so we can anticipate some kind of reaction with price at these levels.
So, I hope you've enjoyed this video and you can move on to the next free video that we've
got in our series. Bye for now.