Blockchain and Cryptocurrency Intermediate - How it Works and Why the Pivot Points Indicator is a Very Good Indicator

The Pivot Point indicator is basically an indicator for predicting support and resistance levels. On a chart, the pivot point indicator determines the different support and resistance levels. The Pivot point is works based on previous price action such as the high, low, and closing prices. Looking at the chart below, we can see the center pivot point which indicated the bullish trend of the market. The market have moved above the first resistance, the second resistance and above the third resistance. Also, we can see the various support levels. During the corrective phase, the market went below the center pivot indicating the bearish trend. The market moved below the first and second support levels. Currently, the market is still below the center pivot and the first resistance level which still indicates the bearish or downtrend.

Pivot Point Reverse Trading

The pivot point reserve trading basically shows the relationship between the previous price actions such as high, low and close. In pivot point reversal, after an uptrend, the close is below the previous low with the highest high. After a downtrend, the close is above the previous high with the lowest low.

What could be a common Mistakes in Trading with Pivot Points

Some of the common mistakes associated with trading with pivot points are;

• When the trader has no idea of supply and demand
• When the trader follows the pivot lines blindly without understanding price actions in the market
• Not paying attention to the support and resistance levels
• Only making use of low time frames and not referencing high time frames as well
• Not focusing on a consistent strategy

What could be the reasons For Pivot Points is Good

The Pivot Points indicator has proven to be a very useful and effective tool for technical analysis, to help cryptocurrency traders capitalize on the market movements and make more profit. As a very popular technical analysis indicator used by a lot of traders, the Pivot Points offers a lot of advantages. Some of the advantages of Pivot Points are;

• Pivot Points indicator can help indicate the support and resistance levels.
• With the Pivot Points indicator, a cryptocurrency trader can determine the best possible entry and exit points.
• Pivot Points can help cryptocurrency traders and investors determine whether the market is bullish or bearish
• Pivot point indicator is not a complex indictor which means anyone can make use of it
• It can help traders know where to set stop loss

Pivot Points indicator on a price chart

For this demonstration, I will be using the AAVE/USDT trading pair. From the chart, we can see that the price was in a downtrend and was moving in a sideways direction. This was the accumulation phase and after that, the price began to break above the center pivot which is also the main pivot at $375.75. The price broke above the center pivot which indicated an uptrend movement. The price continued to push up and broke the first resistance level. It hit a resistance at $401.41 before reversing back down below the first resistance level R1.

The price didn’t reach the previous pivot point but was moving horizontally on the new pivot point. The price moved above the new pivot point and was able to go above the new resistance level and began to move sideways. On the new center pivot point, the price is on a downtrend as it has gone below the main pivot point. The price has continued to decrease and has gone past the first and second support levels, reaching the third support level before it made a reversal back up and above the second support level. Looking at the price movements, I can predict that the price might go back down and possibly go below the S3 support level by the end of the day.

Conclusion

When it comes to cryptocurrency trading and technical analysis, there are a lot of tools that are beneficial in when it comes to price prediction and capitalizing on the market movements in order to make more profits. The pivot point indicator is an amazing indicator that when utilized correctly can help cryptocurrency traders make accurate prediction of best entry and exit points, determine support and resistance levels which is great for entry and exit as well as setting stop loss. However, it is also important to know that no indicator is perfect and that is why it is important to always make use of other indicators to help confirm the signals.