How To Trade Nifty Future Using Pivot Point Trading System (Part-III)

Why do pivot points work? The whole Pivot point trading technique is based on two main market concepts: existence of support and resistance. These two tendencies form the core of the market moves and therefore receive full attention from the vast majority of professional traders who trade on behalf of all kinds of large, medium, small financial institutions, funds as well as for themselves.

Because Pivot points are easy to calculate, millions of automated trading systems in the world automatically execute buy / sell orders analyzing the market moves in relation to the Pivot points. Also, there are very little variations that can take place when calculating Pivot points (those are only timing factors, but even then pivot points can quite often suggest the same data).

These precision in targets and mutual "agreement" among traders on certain key levels for the day cause the market to really shift, turn and move as huge percentage of traders pull in the same direction using basic Pivot points trading rules.

With EMAs crossing, for example, every trader can set different indicators and thus timing and reaction will not be so well coordinated. Also take Fibonacci, where for each time frame traders pull their own Fibonacci levels, same for trend lines — there are as many opinions out there as traders trading Nifty future. But when it comes to Pivot points, no matter what chart you use your Pivots will be the same = levels of support and resistance, where everyone hits the same button at the same time. Pivot points outperform other trading techniques and indicators also because they are predictive as opposed to lagging.

Because so many traders worldwide use Pivot points for trading, all major indices and stocks react at these levels in a quite predictable manner, respecting support and resistance levels and creating a lot of trading opportunities. (Courtesy - Jeff Boyd for a part of this writings)

Now lets see, was there any trading opportunity today using Pivot points in Nifty future. Nifty future opened above the pivot level of 4641. So, the bias for the day was positive and one could only buy near pivot point if the pivot point is respected in the 15 minutes chart (see my earlier post) for a target of R1 (4701), or one can buy for a target of R2 (4741) if R1 is penetrated and sustained. Nothing of them happened, and so it was a no trade day for Pivot Point traders and my god, you are saved from being whipsawed in comparison to other trade methods as Nifty future moved the whole day in narrow ranges.

Special Note - I conduct an one day web-workshop held on every Saturdays on "TRADING FOR A LIVING" where I discuss some of the high probability setups for intraday or swing trading in Index futures or stocks. For registration and enquiry about the workshop, call 9432883838 or mail me at stockmaniacs@ymail.com.