Floor Pivots

Floor Pivots are extremely powerful price-based support and resistance levels calculated using a prior period’s high, low, and close. With proper liquidity and volatility, the pivots will work on any chart, market, timeframe, and even in the most challenging market environments.

In its simplest form, Floor Pivots are price-based support and resistance levels calculated using a prior period’s high, low, and close price.

Usually, we mark pivots for 4 Support S1 to S4 and Four Resistance Levels R1 to R4.

In the current technology time, all charting tools provide these levels as an indicator by default. Still, I am adding the calculation for your reference.

Part of what makes the Floor Pi"ots so e"exceptional is that they are based purely on price. It is this fact that gives pivot traders a huge advantage over other types of indicator-based traders.

Traders that use price-based indicators are using the earliest price information available. Traditional indicators are lagging indicators, meaning most price-based traders have already identified a reversal when they confirm a move. They are already profiting in their trades, leaving the indicator-based bunch to scrounge for “seconds.” The best leading indicators, like Floor Pivots, are always price-based.

Pivot Trend Analysis

Once you get a feel for the pivots, you "ill begin to develop ideas for incorporating them into your trading. Throughout the book, I provide incredible insight that took me many years of study, research, and practice. But if there is just one concept you take away from this book, it is the one I am about to share with you now:

Buy at support in an uptrend and sell at resistance in a downtrend.

"Buy at support in an uptrend and sell at resistance in a downtrend."

This one thing has done wonders for me. In my trading career, I have made some hard rules which I never break, and one of that rules is "Never buy high, and Never Sell Low." This is a simple concept that can be easily overlooked, but it is one of the most powerful concepts you can take away from using pivots or any form of technical analysis in your trading.

In a bullish trend, any pivot level below S1 support levels is not tested during a true bullish advance. Likewise, any levels above R1 are rarely tested during a true decline. If the market is trending higher, you will buy at the support of either S1 or the central pivot range, with your target set to a new high at either R1 or R2. Likewise, if the market is trending lower, you will look to sell at resistance at either R1 or the central pivot range, with your target set to a new low at either S1 or S2. This pattern of trending behavior will usually last as long as the price remains above S1 support while in an uptrend or below R1 resistance while in a downtrend.

The market will remain strictly above S1 in a bullish trend and below R1 in a bearish trend. This will last as long as the market adheres to this paradigm. However, once a severe breach occurs through the first layer of the pivots, you typically see a trend shift toward the opposite extreme. That is, a bullish trend becomes a bearish trend, and a bearish trend becomes bullish.

The Breakaway Play

Floor Pivots make entering the trade far easier.

If the pivots are abnormally narrow, and the market opens the session with a gap that is beyond the prior day’s price range and beyond the R1, the chances of reaching pivots beyond the second layer of the indicator increase dramatically.

When this occurs, study price behavior very closely to determine if the pivot surpassed via the gap will hold if the pivot holds as support (testing R1 from above and immediately seeing buying pressure enter the market at this pivot level with a sharp intra-bar reversal that causes the bar to close bar near the high of its range (bullish wick reversal setup). This test usually occurs within the first 15M of the day breakaway days); you will look to enter the market long with your sights set on R2, R3, or R4 as the target.