Pivot Points Support and Resistance Lines, PP
indicate the average price and potential lines of support and
resistance in a certain time space. We get current values of the
indicator from data received at the previous period.
Very often PP is based on day, week and month
periods. The plot period must differ from the indicator period by one
time at least. Otherwise, if they coincide, the indicator line will
look like a dot and will carry no information. For example, if a PP
indicator is laid on a day plot, then by each trade day bar you will
see dots instead of lines. And if the indicator period is less than the
plot period, you will not see the values at all.
When you analyze the market situation, it is
recommended to use several PP indicators based on week, month and year
periods. If two or more levels coincide, they intensity each other.
Before taking a long or a short position, you should wait until the
price crosses all coinciding levels. Before this, you should not open
Support and resistance levels, received with the
help of the indicator, allow predicting possible levels of Stop Loss
and Take Profit with high precision.
To hold long-term trade, you must know the location
of week, month and year timeframe central axis. It is obvious that if
the price is lower than those turn lines, we may speak about a strong
descending trend. On the other hand, if the price is higher than the
week, month and year central axes, it is a glaring example of a bullish