Pivot Points or Pivot High/Lows

Pivot High/Lows

A pivot high is preceded by a lower bar and also followed by a lower bar. The preceding and following bars must have lower highs and lower lows to the pivot bar.

A pivot low is preceded by a higher bar and also followed by a higher bar, with both bars having higher lows and higher highs.

Where the bars open or close is not relevant.

How to draw in short term trends or waves using pivot points

Looking at the picture below, the bar labeled E is a pivot high. You can see that the bar before it, bar D, and the bar after, bar F both have a lower high and a lower low to bar E. This means at E we have a pivot high.

Bar G is a pivot low, because bar F and bar H both have higher lows and higher highs than bar G.

Bar H is a pivot high, as bars G and I both have lower highs and lower lows to bar H.

If a trader was to use pivot points to determine the short term trend or price waves they would join a pivot high to a pivot low, and then to a pivot high and so on always alternating. This is how they would then draw the waves on their chart.

Using pivot points to define waves or short term trends will create quite messy charts because of the noise of the markets. The use of trend and isolation high/lows over pivots allows the trader to filter out some of the noise depending on the variable used.

Move on to Step 4 - Module 1 > Charting Basics: Trend Points