As already stated, the pivot point zone is a familiar technique as it works simply because of the use and trust from many traders and investors. But what about the other support and resistance zones (S1, S2, R1 and R2)? To predict something likely to happen for the support or resistance level with some mathematical formula in some way is quite subjective. We can not rely on that formula blindly merely because of the formula suddenly popped out on the level. For this reason, we have found another simpler alternative way to map our time frame, and somehow it is more objective and effective.
We used the calculation as showed before. But our support and resistance levels are different from others. We take the earlier session high and low and draw those levels on today’s chart. We’ll do the same to the session before the earlier session. By doing so, we are going to add in four more important levels drawn in our chart besides the pivot point .
LOPS1, low of the previous session.
HOPS1, high of the previous session.
LOPS2, low of the session before the previous session.
HOPS2, high of the session before the previous session.
PP, pivot point.
Those important levels will show us the strength of the market at anytime. The market will be considered as an uptrend market if it is trading above the pivot point. If the market is trading above HOPS1 or HOPS2, it is still considered as an uptrend market and we only take long positions. However, the market is considered as a downtrend market if it is trading below the pivot point. Trading below LOPS1 or LOPS2 is a downtrend market and it is advisable for us to take short trades.
The significance behind this calculation is simple. We all knew that the market stopped at some levels from going higher or lower than earlier session or the session before that because of some reasons. But yet, we don’t know the reasons. By then we only know the fact that the market upturned at that level. All the traders and investors should remembered that where the price stopped in the previous session, and the probability is that the market will upturn from there again (maybe for the same reason, and maybe not). If not, at least we can find some support or resistance at those levels.