Using pivot points as a trading strategy has been around for a long time and was originally used by floor traders. This was a nice simple way for floor traders to have some idea of where the market was heading during the course of the day with only a few simple calculations. The pivot point is the level at which the market direction changes for the day. Using some simple arithmetic and the previous day’s high, low and close, a series of points are derived. These points can be critical support and resistance levels. The pivot level, support and resistance levels calculated from that are collectively known as pivot levels.

An emotional pivot is a distinct turning point in your internal emotional experience. The strongest points are those that have moved the person from a somewhat emotionally balanced state to going up in feeling intensity. These emotions could include for example anger, excitement, greed, fear, anxiety, impatience or on the other hand sadness, guilt, boredom, humiliation, dejection and/or rejection. Quite often emotional pivots become activated firstly by an event (the trader sees the signal on his charts; for instance that the price action had just pierced the supply zone – or resistance). This gets his attention and he immediately asks himself three questions that he and you always ask in the presence of an event (although mostly unconscious). Those questions are 1. What is it? In this case it was a signal that required him to enter a trade. 2. What does it mean to me? Here it meant that he would by necessity be putting himself at risk – thereby initiating the emotional turning point bringing in anxiety and fear. 3. What am I going to do about it? He may become so anxious and fearful about putting his account at risk and possibly being wrong that he does nothing, which would result in a missed trade.

Another event associated in the same sequence might be internal (for instance, making internal pictures of what someone looks like when they are losing – which could be caused by missing the trade). Again the trader unconsciously asks three questions (these same questions are asked every time someone experiences an event. 1. What is it? The “it” here refers to the picture that the trader conjured in his mind of a loser since he has missed a trade due to a lack of follow-through. 2. What does it mean to me? Here the interpretation of seeing a picture of what it looks like to be loser means to him that he is that loser? 3. What am I going to do about it? In this case he assumes the posture of the internal picture effectively making it a reality that he (in his mind) is a loser, a failure, and can’t follow his plan.

A third event might follow, as is often the case during a trading session, and it could also be internal (he might notice that he was feeling angry, irritated, and stressed). As indicated in the above, whenever an event happens you ask those same three “mostly unconscious” questions. 1. What is it? Here the trader recognizes that he is feeling worse, no doubt brought on by what he is internally telling himself (an unconscious conversation); for instance, “…This happens every time.” 2. What does it mean to me? In this instance his meaning is confirmation that he is a failure; why else would he feel such negative emotions. (Of course, this meaning is only in the trader’s mind, it is another example of what he is telling himself).   3. What am I going to do about it? In these types of scenarios, if you were this trader, you might find yourself sulking and missing other high probability set-ups or taking an impulsive revenge trade, adding to poor results. Either example does not bode well for your trading results.

You’ll want to find out as much about your emotional pivots as you can. They are usually your first signal that you are in hot water (with a trade or otherwise). This signal is often a feeling; like a tension headache, butterflies in your stomach, anxiety, fear and so on. When you get that event or internal signal that something is not right; then ask yourself this additional question. “What must I be telling myself or believing to feel this way?” This is a very important question that helps you to begin to identify the impetus for the bad feelings; that is, the unconscious conversation. You can then do something about it. Once you identify the faulty internal data you can start to change it. Remember that thoughts prompt emotions, emotions drive behavior and behavior delivers results.

Just like on a chart with price action pivot points, you can begin to track your emotional pivot points as you identify which set-ups or strategies have associated with them negative emotions. Document your trades with both a trade log (for mechanical data) and a thought journal (for internal data). You can actually indicate on the chart with both text and a mark at which point your emotional pivot became activated. This will help you to be proactive in dealing with the difficult entries and preemptive in using an emotional tool to reduce the intensity of the emotion associated with that particular entry. Your A-Game is absolutely critical to executing in the right place and at the right time. You’ve got to master your mental game before you can hone that A-Game.