Pivot points are a technical analysis indicator used to determine potential support and resistance levels in the market. They are calculated based on the previous day's high, low, and closing prices, and are used to identify key price levels that may influence future price action.
There are several types of pivot points, including the standard pivot point, the Fibonacci pivot point, and the Woodie pivot point. The standard pivot point is calculated by adding the previous day's high, low, and closing prices, dividing the sum by three, and using the result as the pivot point. From this pivot point, traders can calculate support and resistance levels, as well as potential entry and exit points.
Pivot points are most commonly used in intraday trading, and are often plotted on charts along with other technical indicators, such as moving averages, oscillators, and trend lines. Traders use pivot points to help identify potential buy and sell signals, as well as to set stop-loss and take-profit levels.
While pivot points can be a useful tool for traders, it's important to remember that they are just one indicator among many, and should be used in conjunction with other technical and fundamental analysis methods to make informed trading decisions. Additionally, pivot points are based on historical data and may not always accurately predict future price movements.
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