Pivot Points Indicator is a predictive or leading indicator. This is a price level that is used by traders as a possible supports and resistance between market movement. The use of this prior period’s high, low, and close to estimating future support and resistance levels.
Pivot Points Indicator-Description:
Pivot points analysis is a technique for determining key levels. It tends to function as support or resistance and can be turning points. This technique is used by day traders. There are several methods of identifying the exact points. There are some different versions of pivot points likes Traditional, Fibonacci, Woodie, Classic, Camarilla and DeMark. Each type has its own calculation method. Therefore, the maximum use of pivot points is the variation of significant prices likes established highs, lows, opening and closing prices and then apply a calculation to determine these points. These are calculated additional support and resistance levels alongside the pivot points. These can be used to determine when to enter or exit trades or to determine the range of a market. In this indicator, conservative traders look for additional confirmation before entering a trade.
Traders can find the Pivot Points indicator under the STUDIES section in the Zerodha Kite browser app as well as in the Kite mobile App. We can attach the Pivot points indicator on to intraday charts, because they are meant for intraday trades. Please check the image below to understand how we attached the Pivot points indicator in HDFC Bank share price chart.
How to use :
Pivot Points were originally used by floor traders to set key levels. In this, the floor traders are the original day traders and they deal in a very fast moving environment with a short-term focus. The beginning of the trading day, floor traders would look at the previous day’s high, low and close to calculate a pivot point for the current trading day. This Pivot Point as the base, further calculations were used to set support 1, support 2, support 3, resistance 1, resistance 2 and resistance 3. These levels would then be used to assist their trading throughout the day. Also, the type of Pivot Points is standard or Fibonacci.
- If the price is nearing the upper resistance level, then you could SELL the pair and place a stop just above the resistance.
- If the price is nearing a support level, then you could BUY and put your stop just below the level.
However, it usually starts with a cross of the Pivot Point. In sometimes the market starts above or below the Pivot Point indicator. Support and resistance come into play once it approached close to the Pivot level after opening. The concepts behind Pivot Points can be applied across various time frames which is designed for floor traders. It is important to confirm this pivot point signals with other aspects of technical analysis as with all indicators. A bearish candlestick reversal pattern could confirm a reversal of first or second resistance. RSI could confirm oversold conditions at second support.
Categories: Technical Indicators