Pivots

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HH and HL

Higher High (HH) is when the previous bar's high is crossed,and a Higher Low (HL) is when the low is higher than the previous bar's low.

LL and LH

Lower Low (LL) is when the previous bar's low is crossed,and a Lower High (LH) is when the high is lower than the previous bar's high.

So what then is a Pivot?

Lets see our "Hand" example.

Whisk out your right hand again, once again with your right palm facing you.

We have our little finger. The ring finger makes a higher high and low as compared to the little finger. The middle finger is higher high and low as compared to the ring finger. We therefore have a RALLY.

The index finger makes lower highs and lows as compared to the middle finger. The thumb makes lower highs and lows as compared to the
index finger. We therefore have a DECLINE.

The middle finger with two lower highs on both sides(ring and index)now forms a PIVOT.

Imagine we have Area A. Rally starts from Area A which is followed by a decline to an area that is higher than Area A. We call this new area where the stock has declined to as Area B. So on so forth..Therefore Area B is higher than Area A, Area C is higher than Area B, so on so forth. We have therefore what is called an uptrend.
These areas are pivotal areas where the stock stops its decline and rallies upwards. We refer to these turning points as pivots.
Therefore, in the above example, as each pivot is after a decline, and the pivot is the low after which the stock takes off again, we call them PIVOT LOWS.

Right the opposite in a downtrend.The stock declines from an area and then rallies to an area lower than the first, so on so forth. In this case every pivot is after a rally, and the pivot is that area after which the stock declines further to new lows.
As this pivot tells us of that high after which things go back to its declining ways, we call that a PIVOT HIGH.

So,in an uptrend, we have HIGHER PIVOT LOWS. How did we come to that? Each pivot low is higher than the previous pivot low. Therefore we call it higher pivot lows.
In a downtrend, we have LOWER PIVOT HIGHS. How did we come to that? Each pivot high is lower than the previous pivot high. Therefore we call it lower pivot highs.

In a sideways trend,we have nearly equal pivot highs and lows.

This will take some chewing,and digesting. The only way is to look at the charts and start to make out all the pivot highs and lows.

PH and PL marked on a chart

uptrend.png

Keep in mind

A pivot is not exactly a point,and therefore it need not be one single bar with lower high bars on either side to qualify it as a pivot high. It could be 2-3 bars. Basically,whether pivot high or pivot low,don't go in for an exact academic definition. Go with the eye.


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