Pivot Points
Pivot points , support and resistance
Pivot point Trade examples.
A pivot point is a price level of significance in technical analysis of a Stock market that is used by traders as a predictive indicator of market movement. A pivot point is calculated as an average of significant prices (high, low, close) from the performance of a market in the prior trading period. If the market in the following period trades above the pivot point it is usually evaluated as a bullish sentiment, whereas trading below the pivot point is seen as bearish.
Pivot Points are used to project potential support and resistance levels. The main time periods used are daily, weekly, and monthly pivots. The formula for the daily pivot point, support, and resistance is shown below:
Pivot Point = [Yesterday's High + Yesterday's Low + Yesterday's Close] / 3
An example on 15-minute chart of a script shown below
After that, the next potential support was at the Pivot Point. However, the Stock broke through the Pivot Point. Notice that when the Stock attempted to reverse course, it was rejected by the Pivot Point now acting as resistance. An important technical analysis concept is that when resistance is penetrated the prior resistance then becomes support. Similarly, when support is penetrated the prior support then becomes resistance.
From there, the next support was Support Level 1 (S1). S1 held strong and the Stock reversed direction yet again.
The next resistance line was at the Pivot Point, which failed.
The trading day ended by the Stock testing the Pivot Point, now acting as support, which subsequently held. From there, the index rallied on into the close.
More ways to use Pivot Points is discussed below.
In addition to giving buy and sell signals, pivot points give traders a good time to get out of their trade. To illustrate, during a rally some traders will set their sell orders right below the next resistance line. Thus, pivot point resistance and support lines can generate ready made profit targets.
A 5-minute chart example is shown below.
In below chart price opened the day downward, but held steady at Support 2 (S2).
From there, the price rallied past S1 and the Pivot Point. Eventually, the stock found resistance at Resistance 1 (R1).
Next, the Pivot Point offered support initially, but then the stock meandered slightly above and below the pivot point, until finally, the stock accelerated past R1 and then past R2.
The rally continued until one candlestick reached R3, where the bulls were promptly rejected
Information source:- Online trading concept.
Pivot points , support and resistance
Pivot point Trade examples.
A pivot point is a price level of significance in technical analysis of a Stock market that is used by traders as a predictive indicator of market movement. A pivot point is calculated as an average of significant prices (high, low, close) from the performance of a market in the prior trading period. If the market in the following period trades above the pivot point it is usually evaluated as a bullish sentiment, whereas trading below the pivot point is seen as bearish.
Pivot Points are used to project potential support and resistance levels. The main time periods used are daily, weekly, and monthly pivots. The formula for the daily pivot point, support, and resistance is shown below:
Pivot Point = [Yesterday's High + Yesterday's Low + Yesterday's Close] / 3
An example on 15-minute chart of a script shown below
Support Levels
- S1 = [Pivot Point * 2] - Yesterday's High
- S2 = Pivot Point - Yesterday's High + Yesterday's Low
- S3 = S2 - Yesterday's High + Yesterday's Low Resistance Levels
- R1 = [Pivot Point * 2] - Yesterday's Low
- R2 = Pivot Point + Yesterday's High - Yesterday's Low
- R3 = R2 + Yesterday's High - Yesterday's Low
Pivot Point Example
In the chart above, and going from left to right, Resistance Level 1 (R1) held and the Stock reversed course and headed downward.After that, the next potential support was at the Pivot Point. However, the Stock broke through the Pivot Point. Notice that when the Stock attempted to reverse course, it was rejected by the Pivot Point now acting as resistance. An important technical analysis concept is that when resistance is penetrated the prior resistance then becomes support. Similarly, when support is penetrated the prior support then becomes resistance.
From there, the next support was Support Level 1 (S1). S1 held strong and the Stock reversed direction yet again.
The next resistance line was at the Pivot Point, which failed.
The trading day ended by the Stock testing the Pivot Point, now acting as support, which subsequently held. From there, the index rallied on into the close.
More ways to use Pivot Points is discussed below.
Pivot Point Trade Examples
Pivot PointsIn addition to giving buy and sell signals, pivot points give traders a good time to get out of their trade. To illustrate, during a rally some traders will set their sell orders right below the next resistance line. Thus, pivot point resistance and support lines can generate ready made profit targets.
A 5-minute chart example is shown below.
In below chart price opened the day downward, but held steady at Support 2 (S2).
From there, the price rallied past S1 and the Pivot Point. Eventually, the stock found resistance at Resistance 1 (R1).
Next, the Pivot Point offered support initially, but then the stock meandered slightly above and below the pivot point, until finally, the stock accelerated past R1 and then past R2.
The rally continued until one candlestick reached R3, where the bulls were promptly rejected
Information source:- Online trading concept.
