Showing posts with label pivot-point-trading-strategy. Show all posts
Showing posts with label pivot-point-trading-strategy. Show all posts

PIVOT POINTS

PIVOT POINTS 

1. What are support and resistance lines?

Support and resistance represent key junctures where the forces of supply and demand meet.These lines appear as thresholds to price patterns. They are the respective lines which stops the prices from decreasing or increasing. A support line refers to that level beyond which a stock’s price will not fall. It denotes that
price level at which there is a sufficient amount of demand to stop and possibly, for a time,turn a downtrend higher. 

Similarly a resistance line refers to that line beyond which a stock’s price will not increase. It indicates that price level at which a sufficient supply of stock is
available to stop and possibly, for a time, head off an uptrend in prices. Trend lines are often referred to as support and resistance lines on an angle.


Pivot Points
www.Furthergrow.in


SUPPORT

A support is a horizontal floor where interest in buying a commodity is strong enough to overcome the pressure to sell. Support level is the price level at which sufficient demand exists to, at least temporarily, halt a downward movement in prices. Logically as the price declines towards support and gets cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the support level, it is believed that demand will overcome supply and prevent the price from falling below support.


INDIA's Nifty 50 indices showing support level at 9700.

Support Lines
www.Furthergrow.in


Support does not always hold true and a break below support signals that the bulls have lost over the bears. A fall below support level indicates more willingness to sell and a lack of willingness to buy. A break in the levels of support indicates that the expectations of sellers are reducing and they are ready to sell at even lower prices. In addition, buyers could not be coerced into buying until prices declined below support or below the previous low. Once
support is broken, another support level will have to be established at a lower level.


Resistance

A resistance is a horizontal ceiling where the pressure to sell is greater than the pressure to buy. Thus a Resistance level is a price at which sufficient supply exists to; at least temporarily, halt an upward movement. Logically as the price advances towards resistance, sellers become more inclined to sell and buyers become less inclined to buy. By the time the price reaches the resistance level, it is believed that supply will overcome demand and prevent the price from
rising above resistance.


INDIA's Nifty 50 indices showing Resistance level at 7980.

Resistance Level
www.Furthergrow.in

Resistance does not always hold true and a break above resistance signals that the bears have lost over the bulls. A break in the resistance level shows more willingness to buy or lack of incentive to sell. Resistance breaks and new highs indicate that buyer’s expectations have increased and are ready to buy at even higher prices. In addition, sellers could not be coerced into selling until prices rose above resistance or above the previous high. Once resistance is broken, another resistance level will have to be established at a higher level.


Why do support and resistance lines occur?

 A stock’s price is determined by supply and demand. Bulls buy when the stock’s is prices are too low and bears sell when the price reaches its maximum. Bulls increase the prices by increasing the demand and bears decrease it by increasing the supply. The market reaches a balance when bulls and bears agree on a price. When prices are increasing upward, there exists a point at which the bears become more aggressive the bulls begin to pull back - the market balances along the resistance line. When prices are going downwards, the market balances along the support line.


As prices starts to decline toward the support line, buyers become more inclined to buy and sellers start holding on to their stocks. The support line marks the point where demand takes precedence over supply and prices will not decrease below that support line. The reverse holds true for a resistance line. Prices often break through support and resistance lines. A break through a resistance line shows that the buyers have won out over the sellers. The price of the stock is bid higher than the previous levels by the Bulls. Once the resistance line is broken, another will be created at a higher level. The reverse holds true for a support line. 

Support And Resistance
www.Furthergrow.in

 

Change of support to resistance and vice versa

Another principle of technical analysis stipulates that support can turn into resistance and visa versa. Once the price penetrates below the support level, the earlier or the broken support level can turn into resistance. The break of support level signals that the forces of supply have overcome the forces of demand. Therefore, if the price returns to this level, there is likely to be an increase in supply, and hence resistance



Suppot And Resistance Level
www.Furthergrow.in

Another aspect of technical analysis is resistance turning into support. As the price increases above resistance, it signals changes in demand and supply. The breakout above resistance proves that the forces of demand have overcome the forces of supply. If the price returns to this level, there is likely to be an increase in demand and support can be established at this point.

Why are support and resistance lines important?

Technical analysts often say that the market has a memory. Support and resistance lines are a key component of that memory. Investors “tend” to remember previous area levels and thus make them important. When a
price of a stock is changing rapidly each day the buying and selling will be done at a divergent level and there will not exist any unanimity or pattern in price changing. But when prices trade within a narrow range for a period of time an area is formed and investors begin to remember that specific price.


If the prices stay in an area for a longer period than the volume of that spot increases and that level becomes more important because investors remember it exceptionally well. Therefore, that level becomes more significant for the technical analyst. According to experts, previous support and resistance levels can be used as “target” or “limit” prices when the market have traded away from them. Assume that a year ago a rally ended with a top price of 100. That
price of 100 then becomes a resistance level for the rally occurring in today’s market.
Share: