For an effective trading strategy, it is essential to understand how pivot point operates for effective application. Taking power invested in the pivot points means that you get an ultimate support and resistance strategy while making trading decisions. With the use of the pivot points, the subjectivity experienced with the manual establishment of the resistance and support is dealt with. Traders need to be well acquainted with a suitable strategy that can add value to their trading strategies and the pivot extension strategy offers all this.
The introduction of the pivot extension strategy was informed on the pivotal points for effective trading as guided by the market movements. The pivotal extension strategy introduces the use of the previous X+Y bars, with X representing the left bars and the Y bars representing the right bars as indicated in the tool’s settings.
In case there is a high pivot identified, the strategy opens a short position. On the other hand, when a low pivot is identified, the strategy automatically goes long. (Play around with tradingview’s advanced charts for free).
Features of Pivot Extension Strategy
- They are essential for resistance or support levels.
- Uses pivots classified as low and high
- The strategy enters low or high gives a signal
- Uses X+Y bars as an input
How the Pivot Extension Strategy Works
The pivot extension strategy was developed to give insight to traders regarding support or resistance. If the price movement supports a pivot point in the chart, it is treated as just a normal trading level.In case the price has some resistance when hitting this level and suddenly goes oppositely, it means you trade in the direction of the bounce. In simple terms, in case there is a high pivot, it translates to a short position, and if the pivot is low, it is an indication long position.Pivot Extension Strategy Indicator | Indicator Series Click To Tweet
What do Pivot Points Tell Traders?
Compared to the moving oscillators, pivot points are day trading signals that are useful in trading, especially in futuristic markets. This makes it easy for traders to strategize and roll out a plan for trading in advance. For example, if there is a prediction that there are high chances of prices going down, it gets easier to decide to sell.
On the other hand, if the price rises above the pivot point, they will pick the option of buying. When applied in conjunction with other trend indicators, it serves as the best constituent in trading.
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