Full Review of the Pivot Point Calculator for Binary Options
The Pivot Point Calculator is a tool that tries to predict market movement and direction. It is based on the average of closing, high and low price and projects potential “pivot” areas. These areas can be used to predict trend and potential areas of support and resistance. This tool is useful for newbie and expert binary options traders but should be used along with other technical indicators.
Binary Options Free Trading Tool: The Pivot Point Calculator
The pivot point calculator is a tool that is used to automatically calculate projected pivot points. The projections are labeled S1, S2, S3, central pivot, R1, R2, R3 and can be applied to all financial markets. It is a free tool available online and comes standard with most chart packages. It usually comes in the form of a custom indicator which is attached to the “ExpertsàIndicator” folder on MT4, and attached to the chart. It calculates and plots the pivot points on the charts automatically.
Why the Pivot Point Calculator Sucks
This tool sucks because it is does not predict direction well on its own. For this tool to work, the trader must combine it with other indicators for more accurate signals. On its own, it cannot be used with a high degree of accuracy. It is also best used with multiple time frames. The signals generated on each chart have a short lifespan and are easily impacted by longer term trends. For this reason, the pivot point calculator sucks. Mostly efficient only to In/Out Bouadary trades and Touch Options.
Why the Pivot Point Calculator Does Not Suck
Pivot points give a fairly good indication of the range of price movements. The pivot points, especially when confirmed by Fibonacci or support/resistance lines, are ideal areas to contain range bound assets. This tool can be used to trade breakouts or reversals, and hence it is about the only tool that can be used to predict the outcome of In/Out boundary trades with some degree of certainty. It is also great as an addition to a trend following strategy, the pivot points are good places to find entries and potential areas of correction or reversal.
How to Use Pivot Point Calculators in Binary Options Trades
Pivot points are important price levels where the asset could experience a full reversal, or test the level for sometime before continuing in the original direction. Since the pivot points delineate regions of price boundaries, it is a good tool to use in trading the boundary binary option and the Touch/No Touch options. The pivot points can be used in much the same way as a Fibonacci Retracement but have a much shorter signal duration. The price levels projected by the tool are good areas to find resistance, support and potential market turning points. The different projection can also be used to predict certain short price movements based on the open. For example; if price opens above the center pivot then it is bullish for the day but if it opens above the second upper pivot then it will probably be bullish long term but bearish today.
The chart above shows an In/Out boundary trade in which we made a choice that Gold would breach either of the two boundaries before expiration. Expiry was set for 7 days. The asset breached the upper boundary (which was a minor resistance) on day 2 of the trade, and we were able to claim the payout before expiry.
Bet type: OUT
Strike Price: 1573.96 (upper limit) and 1490.73 (lower limit)
Bet Cost: $113.34
Price on Expiration: 1579.84
This example goes to illustrate the importance of the pivot point calculator as a free tool to use in trading binary options.
The Last Word On Pivot Points
Pivot points are a useful tool for short term traders. The projections are great when used as confirmations of other indicators but have many short comings when used alone. This tool should be used with caution. I recommend using it in a practice account like Communitraders before applying it to any real money trades.