FLOOR TRADER PIVOTS
Floor Pivots for the ES ] [
- Floor Traders Pivot
like to trade using lines. Lines define support and resistance areas. Lines can
be straight, curved, horizontal, vertical or angled. I see them as magnet areas
and action/reaction areas. They attract price to it and when price gets there we
get a reaction. Pause sometimes but then repelled back from where it came or
allowed to pass through and on to the next magnet.
Trader Pivots are calculated many ways. I use the calculation used by most
traders. I don't feel there is any magic to the calculation. The effectiveness
self fulfilling prophecy concept. The more people watching a line the more dependable
where this came from
Traders Pivot are a well-known technique used by floor traders (locals)
and market makers in the trading pits to calculate intraday support and
resistance points. This technique
has been around for decades, yet is still much in use today.
Before the advent of computers and sophisticated analysis techniques,
floor traders used a set of calculations to determine key support and resistance
points in the market. They
calculated these points from the previous days open, high, low and close.
The floor traders today still use these points in their intraday trading.
Since the floor traders in the pits are using these points for support and
resistance, it just makes good sense to keep track of these key points and be
aware of them if you are doing any type of intraday trading.
any market, there is an equilibrium point around which trading activity occurs.
In the absence of large numbers of new buyers or sellers, this point
serves as the pivot or focal point for the floor traders (locals) and the market
makers as they adjust their bids and offers.
When prices move away from the pivot, there are zones of support and
resistance that can be derived from the established value area in that
particular market. Penetration of these zones leads to perceived changes in
valuation and usually results in the entry of new players and orders into the
for the day will usually remain between the first support and resistance points
as the floor traders make their markets. If
either of these first points are penetrated, off-floor traders are attracted to
the market. The range of trading
has now expanded and if a second support or resistance point is broken, then
even longer-term traders will be attracted into the market.
of the levels at which different types of traders are likely to enter the market
can assist in determining when a shift in valuation by the locals has occurred.
This is especially useful when there is little outside influence on the
market and the local floor traders dominate trading.
As long as no significant market news has occurred between yesterday’s
close and today’s opening, the local floor traders and market makers tend to
move the market between the pivot point (P) and the first band of support (S1)
and resistance (R1). If these first
levels are broken, look for the market to test the level of support (S2) or
resistance (R2) and then (S3) and (R3).
Pivot Points with other indicators such as
overbought/oversold indicators is easy and helpful. Several examples are: if
price moves up to the first resistance level (R1) and one or more of your other
indicators have moved into overbought territory, the confirmation provided can
create a higher confidence sell signal. However,
if price reaches the first resistance level (R1) and the other indicators are in
a bullish mode, you could make a higher confidence buy decision with an upside
target of the second resistance level (R2).
It is also possible to combine the Floor Traders Pivot Points
with the pport and Resistance Pivot Point indicator to give you
additional support and resistance points.
where the floor traders levels of support and resistance are located can give
you a good framework for what is going on in the pits and should help you in
your intraday buy and sell decisions.