Trading Techniques using the "Secret" Floor Trader's tool!
Author: John L Person III, CTA
September 23, 2003

There is significant risk of loss trading futures and options. Past performance is not indicative of future results. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Copyright © 2003 by John L. Person, CTA

The subject of combining pivot point analysis with Fibonacci Correction and extension levels is a powerful leading price indicator. Many people have labeled Pivot Point analysis strictly for day traders and specifically used by floor traders. The truth is, it can be used for multiple time frames and not just for day trading or exclusively for floor traders. This article will highlight the many benefits that leading price indicators like Fibonacci price extensions and Pivot Point analysis can offer you.

Applying the Pivot Point calculations to predict Support and Resistance levels can be used for calculating the Daily, the Weekly and even the Monthly price ranges. These calculations are an extremely powerful price-predicting tool especially when applied with Fibonacci correction or extension numbers.

This article cover:
1. Which Pivot point formula to use and why.
2. How to account for market opening Gaps in the analysis
3. The background of Fibonacci ratio and series numbers
Below is the most common formula used by traders. There are other variations that some traders use to help offset the difference between Night and Day trading sessions. I use the variation below and account for all trading sessions in my calculations beginning from the night session' s open until the day session' s close. If I am trading the mini-stock index futures like the CBOT mini-Dow contract I take the close at 4PM CST.

Including the all session data for markets that trade twenty-four hours accounts for "gaps" in the market prices. The formula below is still the most widely used. One variation that one can use is to include the Open in the calculation. The formula changes to reflect this, for example P=(O+H+L+C)/4. The reason I do not use this method is one needs to wait until the open to make the series of calculations and does not allow a trader to be prepared before the open of the market. In any case to use the open, High, Low and Close method just incorporate that Pivot Point number to the remaining steps shown below.

For the Weekly calculations take the Open from Sunday night or Mondays day session open and then use the close on Friday. For the Monthly data take the opening of the First day of the month to the close of the last day of the month.

>>REGISTER TO READ MORE >>CLICK HERE<<