Structure Continued….Swing Highs and Lows / Pivots Highs and Lows..
Now you know the necessity of structure and support/resistances. This article explains how to identify the swing highs and lows, which helps us to draw support and resistance lines. The identification of swings highs and lows is our first step into the practical stuff of trading. You need to train your eye to identify them perfectly.
What are the Swing highs/Lows?
These are the turning points in the price. Resistance
In the above picture, point 2 is the swing high and point 3 is the swing low. It is that simple. There is no complex definition for that. But, you can simply identify them in the above image, but it is very hard to do in the live market as we are using candlesticks.
SL confusion. Look at the above image. The arrows drawn are the turning points of the price. Considering each and every turning point as a swing high or a swing low will make the chart messy and it’s very hard to interpret the information considering all these pivots. So, we must have an objective definition for swing highs and lows to make our analysis consistent.
pivot highs and lows
Look at the above image. That is how we define a pivot high or pivot lows.
A candle high is said to be swing high if the highs of two consecutive candles on the right and left of that candle are lower than the high of the considered candle.
A candle low is said to be swing low if the lows of two consecutive candles on the right and left of that candle are higher than the low of the considered candle.
Don’t get confused with the definitions as they are written just for your understanding. Look at the above image and you will understand clearly what are pivot highs and lows.
Read the text in the images. They are self-explanatory. Each and every word of them is important.
The following are also pivot highs.
diff types of pivot highs
The following are pivot lows.
diff types of pivot lows
Go through these images again and again until it gets into your head. We need to identify them almost all the time in the market. Look at the following image which is from live market of TATASTEEL.
PL and PH
There is always room for subjectivity in trading. Understand the objective definitions of pivot highs and lows first. You will know when to apply subjectivity once you enter into the market. In the above picture, look at the pivot low I mentioned in the blue description. Things like that will appear in the chart for you too in the market, and without any conscious thought, you will apply subjectivity. That comes only when you are very thorough with the basics. So, read the basics again and again until you clearly understand them.
One final point about the pivots,
You can only find pivots in the past. You will never know the future turning points in the markets, as we need two candles on the right side to validate it. We never know what is going to happen on the right side of the chart as it is the future.
There is no hurry .Markets remain open forever. So, take your time to learn. You can find the charts in yahoo finance website. Take your favorite stock. Take a screenshot and practice identifying them on your own. If something is not clear, feel free to comment down with a screenshot and I will try to help.
the way you define swing/pivot highs and lows, can there be 2 or more pivot highs without a pivot low between them and vice versa for pivot pivot lows?
(And just to be on the same page, i suppose you mean one and the same thing by the words “pivot high/low” and “swing high/low”.
I personally don’t consider those as two if there is no SH/SL of opposite polarity in between them. Yes. pivot high/low and swing high/low is one and the same in my articles. Sorry for causing the confusion if you troubled with it anywhere.
you have provided us, newbies, with this wealth of knowledge, so please don’t embarrass us by apologizing.
And when you say:
“I personally don’t consider those as two if there is no SH/SL of opposite polarity in between them. ”
Then does it mean that suppose there are 3 consecutive pivot lows – pl1, pl2, and pl3 without any pivot high between them. The first pivot high we get is after pl3, lets call it ph1. So in such case, do you consider only pl1 and ph1 as valid and ignore pl2 and pl3?
In this case, I consider the pivot low which is the lowest of all the three. So if PL3 is the lowest of the three, I consider it as a valid swing low
After reading the entire posts once, I am doing a re-read. And now I have decided that I will try to learn the pivot markings by your style. The earlier way I learned took into account inside bars, outside bars, WRBs and Gaps. Please tell if these 4 conditions are considered while marking pivots by you, or they do not matter in your style of pivot marking.
(Example of inside bar: If in the above example, all the 4 bars B, C, D and E were inside bars of A, would A still be pivot hi or low?)
Yes..2 lower candle to the left and 2 to the right is the only condition for a pivot high. So it will be a pivot high if all the candles are inside bars of A