With all the talk of higher highs and lower lows and pivots and such I thought I would make another addition to the wonderful world of pivot points and just how useful/useless they are.
I have noticed in the past from casual observation that plotting daily historic pivot points (with 5pm est calculation) acts as something of an advance moving average. I noticed that price has a general tendency to stay above the pivot if today’s pivot is above the previous day’s pivot. I have taken that knowledge as a given since I have observed it with my own eyes. In the words of Obi Wan Kenobi, “You’re eyes can deceive you. Don’t trust them.” So, I did a quick test to see if this was, in fact, the case.
If a day’s pivot is higher than the previous day’s pivot then the average daily price (H+L)/2 should be greater than that day’s pivot point. So, is this true? Yes.
It is not true in a fall to your knees weeping with the sudden revelation that you have discovered the keys to a vault which contains a source of ultimate power kind of way but it is true, nonetheless.
EURUSD
Sample: Past 900 days
Pivot Point opened above previous day’s pivot point: 463 Days
Daily Average Price was above pivot point: 283 Days
Percentage: 61%
Pivot Point opened below previous day’s pivot point: 437 Days
Daily Average Price was below pivot point: 277 Days
Percentage: 63%
Just to compare I also checked AUDUSD over the same time period.
AUDUSD
Sample: Past 900 days
Pivot Point opened above previous day’s pivot point: 482 Days
Daily Average Price was above pivot point: 287 Days
Percentage: 59.5%
Pivot Point opened below previous day’s pivot point: 418 Days
Daily Average Price was below pivot point: 255 Days
Percentage: 61%
The AUDUSD’s performance was just a bit lower than EURUSD but there is definitely a general tendency for price to remain above the daily pivot if it opens higher than the previous pivot. If the daily pivot opens below the previous day’s pivot then price will tend to stay below the pivot.
Useful or not? I guess that is up to you. Keep in mind that pivots are calculated in advance for the next trading day :15: