The Most Powerful Pivot Level

Focus: STRATEGIES

Before the advent of computers and charting software, pit traders and market makers used this method to figure out where the markets might be heading. These days, it is part of most traders’ toolboxes, but technician Tom Aspray shows how one special time frame can spot key levels well in advance.

Currently if you ask any audience of traders if they have heard of or use pivot levels almost every hand will go up, however, that wasn’t always the case. I first remember hearing about pivot point analysis from the late Manning Stoller in the 1980s. He was the developer of the starc bands that I have frequently used in my analysis.

I have always felt it was important to give credit to those who originally developed or used a particular analytical tool. I still refer to the TRIN as the ARMs Index as it was developed by an old friend Dick Arms. My favorite volume tool, of course, is the on-balance volume (OBV) and I have frequently given credit to its creator, Joe Granville.

Often times, I either try to explain how I use a particular technical tool or provide my analysis on the markets. I restrict my detailed analysis of indicators to only those tools where the formula is fully disclosed.

In the mid-1990s, I published weekly and daily pivot levels for the cash forex markets to my institutional clients. At that time the formula was not widely distributed.  I even recall that there were a few services that sold the pivot levels for a price. I concluded that the weekly levels were often not reliable enough for me and the pivot levels were not available in most technical analysis programs.

That changed in 2004 with the publication of John Person’s book Complete Guide to Technical Trading Tactics: How to Profit Using Pivot Points, Candlesticks & Other Indicators. In the following years, he gave numerous presentations of his methods at The Traders Expos, and by 2007 pivot points were a common feature of pretty much every trading or technical analysis program.

I had never thought about doing monthly pivot analysis until I read John’s books and later found out that he had been using pivot point analysis for over 20 years.