1. Introduction to Stock Trader Types
  2. Stock Traders’ vs. Stock Investors' Roles in the Marketplace
  3. Decision-Making Methods: Informed, Uninformed, Intuitive
  4. Informed Traders: Fundamental Traders, Technical Traders
  5. Swing Traders
  6. Buy and Hold Traders
  7. Value Traders
  8. Trend Traders
  9. KISS Traders
  10. Momentum Traders
  11. Range-bound Traders - Break-out Traders - Channel Traders
  12. Options Traders
  13. Options Seller Traders
  14. Day Traders
  15. Pattern Day Traders
  16. Intra-Day Traders
  17. Intra-Day Scalp Traders
  18. Contrarian Traders
  19. Active and Passive Traders
  20. Futures Traders
  21. Forex Traders
  22. Online Stock Traders
  23. Pivot Traders
  24. News Traders
  25. Noise Traders
  26. Sentiment-Oriented Technical Traders
  27. Intuitive Traders
  28. Price Action Traders
  29. Price Traders
  30. Detrimental Traders
  31. Unsuccessful Types of Stock Traders
  32. Conclusion

Pivot traders are those who believe that the exact value or price of a stock at any particular time is unknowable. While some traders base their strategy on the presumption that stocks are inaccurately priced and that the market will eventually reflect the intrinsic value, pivot traders believe that there are simply too many variables in play to be able to say a definitive price. These trades tend to believe that a stock moves between popular price values based on past company performance. The stock may then pivot by breaking through a support or resistance level.

As you might expect from the above description, pivot traders look to past performance as the strongest indicator of future performance. They tend to use a system called the pivot point system to help determine where the price is relative to previous action. The pivot point is a turning point and it can be classified as a technical indicator. It is derived by calculating the numerical average of the high, low, and closing prices for any stock or other security, and based off of the previous day’s trading range.

The pivot point is the price at which the sentiment of the market changes. As such, it can be used to predict changes in investor interest and action. One advantage to the pivot point system is that it is based on price history as opposed to other indicators. Indicators can be delayed relative to the price of a stock, so the pivot point system helps to execute trades before other traders may even enter the market.

Most pivot traders believe that if a market breaks the pivot level up then the sentiment is bullish, and the market is likely to rise. The reverse is true if a break of pivot level down occurs.

Why pivot trading works

Pivot trading works largely because of its support and interest among many investors across the retail, institutional, and banking worlds. Part o the strength of the pivot system lies in the fact that many traders believe it to be accurate. Pivot trading is not a new phenomenon; it has been used for decades in a variety of markets. What separates profitable traders from those who are unsuccessful is the simple act of following the trend of the day, cutting losses, and then letting profits run to the next pivot value. As such, pivot points tend to work best on highly liquid markets. (For more, see Using Pivot Points for Predictions)

Advantages of pivot trading

Pivot points provide a good sense of overall market trend. If the pivot point price is violated in an upward direction, the market is bullish, and the converse is true as well. Long-term traders tend to utilize weekly pivot points, while short-term traders use single pivot points for a day. Pivot point price levels can also be used to enter and exit the markets, making things easier for a trader. Further, pivot points help to distinguish between support and resistance levels.


News Traders
Related Articles
  1. Trading

    Pivot strategies: A handy tool for forex traders

    Make more educated trading decisions by identifying major turning points.
  2. Trading

    Using Pivot Points for Predictions

    Pivot points were originally developed by floor traders in the equity and commodity exchanges. Learn one of the most common methods of finding support and resistance levels.
  3. Trading

    Make Money With the Fibonacci ABC Pattern

    We break down this indicator into simple, easy-to-understand pieces so you can profit.
  4. Trading

    Amazon Wins Online Dollars and Prime Members

    Amazon reports record holiday sales and new Prime Members, expanding its online reach.
  5. Trading

    Stocks Plummet Amid Fears of a Trade War

    The major U.S. indexes declined sharply this week in response to plans to impose tariffs on steel and aluminum imports.
  6. Trading

    Stocks Rise on Crude Recovery and Yellen Testimony

    Weekly technical summary of the major U.S. indexes.
  7. Trading

    Stocks Begin the Year on a High Note

    Positive payroll data pushed stocks up for the week but the Dow finished just shy of the 20,000 mark.
  8. Trading

    Stocks Move Lower Amid Rising Risk

    Political risks and trade concerns sent most major U.S. indexes lower over the past week, although small caps posted slight gains.
  9. Trading

    Stocks Mixed After a Rocky First Quarter

    Mixed results over the shortened holiday week ended a volatile quarter for the major U.S. indexes.
  10. Trading

    Stocks Move Sharply Lower Amid Rising Tensions

    The major U.S. indexes declined over the past week as Facebook shares plummetted and tensions heightened around global trade.
Frequently Asked Questions
  1. What is the role of the nation-state in globalization?

    Learn about the evolving role of the nation-state in an increasingly globalized world as fewer boundaries restrict international ...
  2. What are some examples of positive correlation in economics?

    Learn the most common examples of positive correlation in macroeconomics and microeconomics, including demand and price, ...
  3. Human capital vs. physical capital: What is the difference?

    Learn the difference between physical capital and human capital. How to find the value of each type of capital in a company's ...
  4. Which factors can influence a country's balance of trade?

    Find out about the factors that affect a country's overall balance of trade and how it is used as an economic indicator.
Trading Center