Pivot points have been used by floor traders for years, they are a commonly used indicator of support and resistance areas. A few years back I began to experiment with pivot points. After I got comfortable with them, I began to really like trading with them as an additional indicator.
Now pivot points are not your run of the mill indicator for market price action. This is one of the few indicators that is also used as a stand alone trading system, there are traders who have made entire careers by only trading this indicator. I do not and will not ever endorse using any one indicator as your sole indicator.
I use pivot points, along with other indicators to find areas which present low risk trades. If I am watching to make a trade on a crossover of the 5 and 10 period moving averages. I will watch for cross over just after the moving averages have moved past a pivot point. I definitely do not take a trade that has a pivot point that the price may reverse off of. I have seen plenty of trades be whipsawed (A sudden reversal of price direction) by making this error in judgement.
By using the pivot points to keep you out of whipsaw zones you can improve your odds by about 9-12% to have a profitable trade.
Their are several ways people figure the pivot points for any given day, I personally get mine from another online trader, his pivot points are the most accurate I have seen. Pivot points are a great tool for traders, I use them everyday but always remember the most important part of trading is your money management.
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