Understanding Pivot Points, Support, and Resistance: A Guide for Traders
Pivot points, along with support (S1, S2) and resistance (R1, R2) levels, are widely used in technical analysis for predicting potential price movements in markets. Traders, especially day traders, use these levels to identify entry and exit points based on historical price action.
Investors in stocks, forex, commodities, and cryptocurrencies can apply these tools to make informed decisions about buying, selling, or holding assets. By tracking how prices react to these levels, traders can anticipate trends and potential reversals, improving their decision-making strategies.
Here’s how traders might use S1, S2, R1, and R2 with pivot points:
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Pivot Point (PP): The pivot point serves as a reference. If the price is above the pivot, traders might look for buying opportunities, while if it’s below, they might consider selling.
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Support (S1 or S2): If the price is falling and reaches S1 or S2, traders may buy, anticipating the price will bounce upward.
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Resistance (R1 or R2): If the price rises and nears R1 or R2, traders might sell, expecting the price to reverse downward.