The main job of a trader is to predict the markets. Pivot point is one such technical analysis indicator that helps the trader to determine the overall trend of the market at different time frames. It gives a brief about directional movement. It helps in analysing bearish and bullish trends.

In this article

·         What is Pivot Point?

·         How to analyse chart using Pivot Point?

·         How to use Pivot Points indicator on Keev?

Category:- Trend Indicator

Type –Leading Indicator

What is Pivot Point?

Pivot point is the simple average of the high, low and closing price of the previous day. Pivot points are calculated to determine the changes in market trends from bullish to bearish and vice-versa. The pivot point is the base for the indicator. The support and resistance levels are also predicted based on the pivot table.

The formula of Pivot Points:-

P= (High+Low+Close)/÷ 3

R1 = (P× 2) – Low

R2 = P + (High – Low)

S1 = (P × 2) – High

S2 = P – (High – Low)

Where:-

P=Pivot Point

R1= Resistance 1

R2= Resistance 2

S1= Support 1

S2= Support 2

How to analyse chart using Pivot Point?

There are two types of strategies used for intraday trading using pivot points.

Pivot Point Bounce

Pivot bounce is an important strategy that helps the trader to take buy/sell decisions. This strategy focuses to find bounces at pivot points in the chart. If the price of a stock touches the pivot point and bounces back then one can open the trade. In a pivot bounce strategy, you shall buy the stocks when there is an upward bounce on the upward side. On the other hand, if the reverse happens, then it’s a downward bounce and it's time to sell the stock.

Pivot Point BreakOut

Here the trader is under the assumption that the price will violate the pivot points and continue trending in an upward or downward direction. A stop-loss order is placed here to ensure a position is opened when this happens. This mostly happens in the morning.