Students always have a lot of questions. The ones who take their education seriously are the ones who seek answers for them. I always enjoy receiving emails from my students. It is a way for me to stay sharp as an instructor as well as stay connected to those I have chosen to help by teaching trading.
I recently received this question regarding basing and pivots:
Could you explain the difference between a “base” and a “pivot” in an upcoming Lesson from the Pros?
What is the difference and is there a difference?
Do 2 candles make a base which is usually what occurs with a pivot (reversal)?
I see a pivot as usually 2 “long” candles-mostly a green and a red or vice versa and then the stock starts to retrace back towards the direction it was moving. Is this normal?
I suppose one must “look to the left” to see the nearest demand/supply zone to confirm?
Please comment and clarify the differences between a base and a pivot.
Thanks & Happy New Year!
When I am looking for entry and exit points while using Online Trading Academy’s core strategy, I focus on finding the origin of imbalance between demand and supply. This usually comes near a base. To me, a base is a pause in price movement. It could be as short as one candle in a strong trend or many candles where price moved sideways before trending again. In our courses we teach you how to identify the four price patterns that use bases for originating supply or demand zones.
Pivots are a turning point in price where you have three candles that exhibit a particular price pattern. A pivot high would be a candle that has a high while the candle just before and after it would have both lower highs and lower lows than the middle candle. A pivot low would be a low surrounded by candles that made higher highs.
I do not focus as much on these pivots in my trading as I do the supply and demand zones. Often these pivots will be our opportunity to enter into a trade as they are usually a test of a prior demand or supply zone.
I think this answers your questions Jason, and thank you for asking them. I hope you and everyone have a great and prosperous new year and continue to seek answers for whatever questions you may have. Life is a journey of discovery and that is part of the fun.