Im confused about pivot points...need help pls?

Beginner Questions
4

If you’re using DAILY pivots, then yesterday’s O, H, L, and C are used to calculate the pivot levels for today.

You have to decide (or let your charting package decide for you) when a forex “day” begins and ends. The School lesson that you referred to says most traders use 4pm New York time. I disagree. I think it should be 5pm New York time.

Also, notice that several different formula sets are available for calculating pivots. The most popular pivots are the so-called Classic Pivots. The formulas used to calculate Classic Pivots do not use the Open; only the High, Low, and Close of the previous period are used to calculate pivots for the current period.

A chart can be divided into equal periods of any length — 1 hour, 4 hour, 8 hour, 1 day, 1 week, etc. — for use in calculating pivots. The general rule is that the previous period’s OHLC determine the pivot levels for the current period.

Below is a chart showing Daily pivots for the GBP/USD, based on 5pm New York time as the start of each day.

The Classic Pivots shown here were plotted automatically by my charting package, based on the previous day’s H, L, and C. I have marked the previous day’s Open simply for reference; it did not figure into the calculation of the pivots shown.

I added the day separators (green vertical lines) to illustrate the daily time periods.

1254×605

5

Thanks OOPs, Hugh, and Clint for the insight. Cliff the pic posted completely dissected my problem and now I overstand! Thx! Now I can get to High School finally! :smile::+1:

6

dde04ddc4d are suppose to be emoticons but I guess they don’t work in forums… Oh well

7

Hi Clint

This reference on investopedia (Using Pivot Points For Predictions) also states that for 24-hour markets (like forex) the New York closing time is used (4pm EST)

How important, or not, is it to use 4pm EST? Why do you use 5pm?

Thanks in advance for your help!

UPDATE:
I found a rationale for a different time to calculate pivots from a book “Candlestick and Pivot Point Triggers” by John Person

If the exchanges and the banking system use a specific
time to settle a market, then that is the time that you should consider
a close. The exchanges and banks should know—their rules make the
money move…
• Stock traders use the settlement price from the close of business at 4
P.M. (ET).
• Forex traders should use the 5 P.M. (ET) New York bank settlement
close.
• Futures traders, in the e-mini–S&P, Nasdaq, and Russell contracts, use
the close of 3:15 P.M. (CT). For the Chicago Board of Trade (CBOT)
mini-Dow contract, I take the close at 4 P.M. (CT).
• For the weekly calculations, take the open from Sunday night’s session,
and use the close on Friday.
• For the monthly calculations, take the open from the first day of the
month, and use the close of the last day of the month.

8

Here’s a copy-and-paste from a previous post in which I explained the logic of the [B]5pm New York[/B] open/close time:

If you choose to use daily pivots, as I do, then you have to define what a “day” is. You could use midnight-to-midnight in your local time zone. Or you could use midnight-to-midnight GMT. Or you could use some other 24-hour period.

I believe that the optimum “day” is one which opens and closes at 5pm New York time.

That’s because, in the 24-hour worldwide forex market, 5pm New York time is the closest thing we have to the end of one trading day, and the beginning of the next trading day. At 5pm New York time, the normal business day has ended in Europe and in North America; the business day has not yet started in Asia; and only New Zealand and Australia are open for business. Generally, the lowest trading volume of the entire 24-hour trading day occurs in the hour between 5pm and 6pm New York time.

5pm in New York is 21:00 GMT in (northern hemisphere) summer, when the U.S. is on daylight saving time; and it’s 22:00 GMT in the winter, when the U.S. is on standard time.

If you are not in the eastern U.S. time zone, then you need to make the appropriate adjustments so that your pivot points are based on daily charts which open and close at 5pm New York time.

In the text that you quoted, John Person has got it right — 5pm New York time is the nominal open/close time of the forex market.

Or, if you prefer, you can use Midnight at Castle Dracula in Transylvania as the open/close time of the forex market, and you can base your daily pivots on that time. It works just as well as 5pm New York.

9

That’s settled it - I shall use Dracula Time henceforth! I have two reasons for doing so, one of them personal.
I have actually visited Bran castle in Romania while I was spending some months there with my girlfriend at the time. Secondly, this year my broker, Alpari UK, changed their MT4 server time to be synched with Eastern European time, to remove small trading candles on Sundays. I have no more arguments left.

Thank you very much Clint!

10

4pm / 5pm I think they are the same really … EDT / EST … GMT / BST ?

Already confused enough by ForEx, why give Time to add to it ? ??

11

[B]• Short answer:[/B]

Just use 10 pm London time (which is 5 pm New York time) as the start of each trading day, and forget about EST/EDT/GMT/BST.

[B]• Long answer:[/B]

This is easy to sort out.

For a moment, let’s ignore Daylight Saving Time (what you call Summer Time).

If you agree that B[/B] on most trading days, forex trading volume drops almost to zero shortly after 5 pm New York time, and B[/B] this lull in trading is tantamount to the “close” of the trading day — then, the only thing you need to know is this: When it’s 5 pm in New York, what time is it in your time zone?

London (and all of the U.K.) is 5 hours ahead of New York. So, 5 pm in New York is 10 pm in London — [I]almost[/I] every day of the year.

Why not [I]every[/I] day of the year?

Well, now we have to throw Daylight Saving Time into the mix. In the summer, the U.S. and the U.K. go onto DST (or BST, as you call it). That means that the 5-hour time difference between London and New York is preserved. But, our two countries don’t shift from standard time to daylight saving time [I]on the same date.[/I]

The U.S. always makes the shift first in the spring, and last in the fall — out of synch with the U.K. and all of Europe — and it’s been this way for several years now. The result is that for 2 or 3 weeks in the spring, the U.S. has gone onto DST, while the U.K. remains on standard time. And then, for one week in the fall, the U.K. has returned to standard time, while the U.S. remains on DST.

During these periods — 2-3 weeks in the spring, and one week in the fall — the time difference between London and New York is [I]4 hours,[/I] instead of the normal 5 hours.

So, if you use 10 pm London time as the proper close of the forex trading day, then your Daily Pivots will effectively be based on the 5 pm New York close — except for 2 or 3 weeks in the spring, when you are actually using 6 pm New York time, and then for one week in the fall, when you are actually using 4 pm New York time.

Will it matter to your Pivot analysis to be off by one hour for these short periods?

It might matter, once in a while. But, if you really hate time zones and time changes, then just ignore those 2 short periods. Just use 10 pm London time (as equivalent to 5 pm New York time) throughout the year.

On the other hand, if you want to learn more about these daylight saving time shifts, THIS THREAD details all the changes which have just taken place this spring.

.

12

I only posted because I am a Newbie and confused.
My confusion at that time was as to why the Close time was important to Pivot Points.
You have, however, confirmed that Close isn’t important in itself … “[B][I]Yesterday[/I][/B]” is.

:57:

13

[QUOTE=“ProBowlUK;760843”]I only posted because I am a Newbie and confused. My confusion at that time was as to why the Close time was important to Pivot Points. You have, however, confirmed that Close isn’t important in itself … “Yesterday” is. :57:[/QUOTE]

Don’t answer today’s question with yesterday’s answer.

14

Well, that was a cute reply.

That reply doesn’t address ProBowl’s question, in any way. Instead, it says this —

You shouldn’t waste your time with pivots, because the past can’t predict the future.

CaMike’s reply addresses the belief that indicators (including pivots) — [I]which analyze past price action, but lag behind present price action[/I] — cannot tell us anything useful about future price action. That’s a widely-held view, but it’s far from a universal view. And it’s obviously not ProBowl’s view. ProBowl wants to use pivots.

If he were the only trader in the world using pivots, he would be wasting his time. But, thousands of traders rely on pivots as part of their chart analysis, and that fact is important because —

The thing that makes pivots work reasonably well, a lot of the time,
is that [I]enough people believe pivots work, and use pivots.[/I]

In fact, the larger the community of pivot-users, the better pivots will work.

And that happens to be true of all lagging indicators.

.

15

[QUOTE=“Clint;760902”] Well, that was a cute reply. That reply doesn’t address ProBowl’s question, in any way. Instead, it says this — You shouldn’t waste your time with pivots, because the past can’t predict the future. CaMike’s reply addresses the belief that indicators (including pivots) — which analyze past price action, but lag behind present price action — cannot tell us anything useful about future price action. That’s a widely-held view, but it’s far from a universal view. And it’s obviously not ProBowl’s view. ProBowl wants to use pivots. If he were the only trader in the world using pivots, he would be wasting his time. But, thousands of traders rely on pivots as part of their chart analysis, and that fact is important because — The thing that makes pivots work reasonably well, a lot of the time, is that enough people believe pivots work, and use pivots. In fact, the larger the community of pivot-users, the better pivots will work. And that happens to be true of all lagging indicators. .[/QUOTE]

Do you know what a pivot is? It’s not an indicator. It’s price.

If price goes up, then pivots down. It’s a pivot. One, two, three hundred bars. All pivots.

Do they work? Yes, They can’t not.

How you use a pivot is an entirely different question. But the most important.

16

That’s ridiculous.

[B]Pivots take [I]past prices[/I] (from the previous day, week, month, etc.),
manipulate them mathematically to calculate S2, S1, P, R1 R2, etc.,
and then project those calculated results [I]into the future,[/I]
in the hope that they will predict future price action.[/B]

That describes — exactly — how every indicator works.

You and I have one thing in common: Neither one of us knows what you’re talking about.

.

17

[QUOTE=“Clint;760934”] That’s ridiculous. Pivots take past prices (from the previous day, week, month, etc.), manipulate them mathematically to calculate S2, S1, P, R1 R2, etc., and then project those calculated results into the future, in the hope that they will predict future price action. That describes — exactly — how every indicator works. You and I have one thing in common: Neither one of us knows what you’re talking about. .[/QUOTE]

Yeeeeeeeeeep.

18

[B]Pivots take [I]past prices[/I] (from the previous day, week, month, etc.),
manipulate them mathematically to calculate S2, S1, P, R1 R2, etc.,
and then project those calculated results [I]into the future,[/I]
in the hope that they will predict future price action.[/B]

Pivots don’t do anything Cliff, They don’t manipulate nor project. They are.

I think you’re making a very simple “do they work” as the original poster mentioned, very complicated. “Yes, they work, over and over again.” Should be your answer, but you you like to tell everyone how smart you are.

And Cliff, you need look at more pivots. They are telling you something.

19

Did you mean the [B]end [/B]of trading in NY ?

20

[U]CaMike …[/U] I have not noticed anywhere Cliff has stated that Pivots are [I][B]manipulators[/B][/I].

             Even I (a new Newbie) can understand that Pivots are INDICATORS and are a possible guide 
             to future activity.
21

Yes, 5 pm New York time (10 pm London time) is the end of one trading day and the start of the next trading day.

The trading day we call “Monday” begins at 5 pm New York time on Sunday, and ends at 5 pm New York time on Monday. And, so forth.

.

22

…

Forgot to add -

when used with [I]Lines of Support & Resistance[/I], and other indicators.

Can I ask if there are any Indicators that might be more logical to use with Pivot Points ?

cheers

23

I agree, provided your levels (lines, or zones) of support and resistance are shrewdly selected.

Often, you will find that one or more of your S/R levels coincide with each other, or with a pivot level. This is called [I]confluence,[/I] and it’s an important thing to take note of.

[I]More logical than S/R levels?[/I] — No.

[I]Potentially useful[/I] as clues to what’s coming today, or this week? — Maybe.

You might want to look at Fibonacci retracement levels, and take note of any confluences which appear.

Referring to the current 1-hour EUR/USD chart, if you drop a fib on the swing from Thursday’s High to Friday’s Low, you will see a very close confluence between the 50% fib retracement level and Friday’s High. That level [I]could[/I] be important going into this new calendar week.

Be aware that confluences are seldom perfect to the pip.

In confluences, as in horse-shoes and hand grenades, close counts.

.