Except from the upcoming book (Price Action and Pivot Points)

Taken from the chapter Black Holes and Pivot Points:

According to the General Theory of Relativity, a black hole is an area or region in space possessing a gravitational field of immense power that nothing can escape its pull once its reached a certain distance from it (the Event Horizon), not even la luz. It purportedly features an invisible inside or interior which begs the question as to how can we know if its existence. The answer is by analyzing the behavior of stars, matter and space around it. Anything getting close enough to a black hole gets attacted, or shall I say pulled into them, via the gravity which exists inside them. This is exactly how pivot points relate to price action and the statistics support this theory.

On a basic level, we can infer their power (pivot points) because analysis on pivot points and a 1hr chart will show that over time, on average, 75-90% of the 1hr candles will touch a pivot point (including mid-pivots). If I were to tell you price had a 75-90% chance of touching a particular event, would you pay attention to it? I’d hope so. Do we have to know why they do? Not necessarily but we can immediately infer that if price action touches pivot points 75-90% of the time (1hr candles on any given day) then we can also infer it is the institutional players which are placing orders at or close to them.

Since institutional accounts are what move the market more than anything else, and since price is so often attracted to them, then the most logical conclusion would be they are placing their orders there more than anything else. This postulate means nothing is more powerful in terms of placing one’s entry and exits other than pivot points. If you are going to enter the market, best you do it at or near a pivot. If you are going to have a target, a pivot level is a wise choice. If you are going to have a stop, beyond the nearest pivot to where you want to get is statistically advisable. Thus, it is the authors hope after this book, an intensive study will be done on pivots due to their overall statistical impact on the market, particularly price action.

Consequently, whatever your reference point or deciding factor for getting in the market, albeit a moving average, fibonacci level, bollinger band, support/resistance level, etc., a pivot level near such an entry by default will improve the overall success of such a trade via the magnetic effect they have upon price and institutional accounts to place orders around such levels. Now is as good a time to discuss some of the additional statistics which support their black hole or gravitational effect upon price but if its true, then pivot points are just as powerful as black holes considering they affect all the ‘matter’ or price around them.

Rejection or Acceleration – Two Songs

Revisiting our mantra about pivots, ‘price generally has two main responses to pivot points, that of rejecting off them or accelerating past them once broken it would help to understand the why behind such a mantra.

Keep in mind this is not the final edit and may vary from the published version

The book is set to be published sometime in the 1st or 2nd Q of 2010.  We actually have Pivot Point and Price Action strategies not discussed in this book in our ProForex Course.  To view more information about this course and how it can advance your trading and increase your profitability, click on the following link https://2ndskiesforex.com/pro-forex-trading-course/

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Buddhist, Trader and Philanthropist

I'm Chris Capre, Founder of 2ndSkiesForex. I help traders of all levels change the way they think, trade and perform. As a professional trader, I specialize in trading price action. As a teacher, my passion lies in showing you how to re-wire your brain for successful trading. Want to improve your edge right now? Visit my Price Action Course page.