What Are Pivot Points?
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Professional traders and market makers use pivot points to identify potential support and resistance levels.
Simply put, a pivot point and its support/resistance levels are areas at which the direction of price movement can possibly change.
FX Signals – are very similar to Fibonacci levels. Because so many people are looking at those levels, they almost become self-fulfilling.
The major difference between the two is that with Fibonacci, there is still some subjectivity involved in picking Swing Highs and Swing Lows.
With pivot points, forex traders typically use the same method for calculating them.
Many traders keep an eye on these levels and you should too.
S stands for Support.
Introduction to Financial Markets
But don’t get too caught up in thinking “S1 has to be support!” or “R1 has to be resistance.”
We’ll explain why later.
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Basic Japanese Candlestick Patterns
What do spinning tops, marubozus, and dojis have in common?
They’re all the basic types of Japanese candlesticks!
Let’s take a look at each type of candlestick and what they mean in terms of price action.
Japanese candlesticks with a long upper shadow, long lower shadow, and small real bodies are called spinning tops. The color of the real body is not very important.
The Spinning Top pattern indicates the indecision between the buyers and sellers.
The small real body (whether hollow or filled) shows little movement from open to close, and the shadows indicate that both buyers and sellers were fighting but nobody could gain the upper hand.
Even though the session opened and closed with little change, prices moved significantly higher and lower in the meantime.
Neither buyers nor sellers could gain the upper hand, and the result was a standoff.
If a spinning top forms during an uptrend, this usually means there aren’t many buyers left and a possible reversal in direction could occur.
Sounds like some kind of voodoo magic, huh? “I will cast the evil spell of the Marubozu on you!”
Fortunately, that’s not what it means. Marubozu means there are no shadows from the bodies.
The word “marubozu ” translates to “bald head” or “shaved head” in Japanese.
So a Marubozu candlestick is a bald candle or shaved candle means it has no shadow or wick.
Depending on whether the candlestick’s body is filled or hollow, the high and low are the same as its open or close.
A White Marubozu contains a long white body with no shadows. The open price equals the low price and the close price equals the high price.
This means that the candle opened at its lowest price and closed at its highest price.
This is a very bullish candle as it shows that buyers were in control of the entire session. It usually becomes the first part of a bullish continuation or a bullish reversal pattern.
A Black Marubozu contains a long black body with no shadows. The open equals the high and the close equals the low.
This means that the candle opened at its highest price and closed at its lowest price.
This is a very bearish candle as it shows that sellers controlled the price action the entire session. It usually implies bearish continuation or bearish reversal.
Depending on where a marubozu is located and what color it is, here are few guidelines:
If a Black Marubozu forms at the end of a downtrend, a continuation is likely.
If a Black Marubozu forms at the end of an uptrend, a reversal is likely.
Doji candlesticks have the same open and close price or at least their bodies are extremely short. A Doji should have a very small body that appears as a thin line.
When a Doji forms on your chart, pay special attention to the preceding candlesticks.
If a Doji forms after a series of candlesticks with long hollow bodies (like White Marubozus), the Doji signals that the buyers are becoming exhausted and weakening.
In order for the price to continue rising, more buyers are needed but there aren’t any more! Sellers are licking their chops and are looking to come in and drive the price back down.
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