WHAT PIVOT POINTS ARE IN SIMPLE TERMS
Let's start with the fact that Pivot points are quite an old tool and have been used for a long time. The difference is that in the early days traders had to build Pivot points themselves, but today there are indicators that build these points.
✴️ BASIC CONCEPTS
Pivot points are key points of price chart reversal, i.e. the place from which the price chart is most likely to reverse. Different pivot points have different calculation formulas. This is very similar to Fibonacci, as there are no clear criteria and several possible courses of action.
The following is a list of the most popular calculation of data:
1. Traditional is the very first method of calculation, still popular in the stock exchange;
2. Classic derived from traditional, slight differences in calculations;
3. DeMark is the formula developed by the SAC Capital Advisors fund;
4. Woody the formula heavily references the previous day's closing price;
5. Camarilla derived from the classic one, slight differences in calculations;
6. Fibonacci is based on the Fibonacci formula.
Of course, the points don't always work and they have false signals, but how to filter let's figure it out. There are also Pivot points like this, these are just the ones built using the traditional formula:
✴️ TRADING STRATEGIES
We intentionally did not write each formula, as this information is fully available on the Internet and not everyone is interested in it. The most interesting thing is to learn how to use these indicators in practice, which we will do now.
If we think logically, there can be only two strategies:
Strategy for level breakout;
Strategy for the level rebound.
That's all, there is nothing else to think of.
✴️ LEVEL BREAKOUT STRATEGY
For the breakout of any level, you need to take into account several details:
1. The quality of the breakout, i.e. the presence of an impulsive movement;
2. The trend moves in the direction in which the breakout occurred, i.e. the exclusion of a false breakout;
If these factors are met, then we can say that the breakout is real and it is worth looking for an entry point. Ideally, it should be like this:
Obvious consolidation above the control resistance by pivot points. Stop in this case is placed slightly below the breakout candle, take profits can be stretched by a grid between the Pivot points above. That is, if there was a trade, it would look like this:
✴️ LEVEL BREAKOUT STRATEGY
The strategy for level breakout should also be accompanied by some additional model. For example, it can be a pinbar, RSI divergence and so on. That is, you can choose many variants, the main thing is the presence of a reversal level nearby. In the simplest form, it should look like this:
As you might expect, there are 3 factors to enter the trade and not to buy here would be a much bigger risk than to stay on the sidelines. There is RSI divergence, there is double bottom by candlestick analysis, there is Pivot level, risk/profit ratio is very good. It looks like this:
✴️ CONCLUSION
The pivot point indicator is a great way to find trend reversal points and corrections, for example, you can combine it with Fibonacci levels and find out the end of a correction more precisely. Try it, trade, the indicator is very easy to use and understand. Successful trading and good luck in the markets!
✴️ BASIC CONCEPTS
Pivot points are key points of price chart reversal, i.e. the place from which the price chart is most likely to reverse. Different pivot points have different calculation formulas. This is very similar to Fibonacci, as there are no clear criteria and several possible courses of action.
The following is a list of the most popular calculation of data:
1. Traditional is the very first method of calculation, still popular in the stock exchange;
2. Classic derived from traditional, slight differences in calculations;
3. DeMark is the formula developed by the SAC Capital Advisors fund;
4. Woody the formula heavily references the previous day's closing price;
5. Camarilla derived from the classic one, slight differences in calculations;
6. Fibonacci is based on the Fibonacci formula.
Of course, the points don't always work and they have false signals, but how to filter let's figure it out. There are also Pivot points like this, these are just the ones built using the traditional formula:
✴️ TRADING STRATEGIES
We intentionally did not write each formula, as this information is fully available on the Internet and not everyone is interested in it. The most interesting thing is to learn how to use these indicators in practice, which we will do now.
If we think logically, there can be only two strategies:
Strategy for level breakout;
Strategy for the level rebound.
That's all, there is nothing else to think of.
✴️ LEVEL BREAKOUT STRATEGY
For the breakout of any level, you need to take into account several details:
1. The quality of the breakout, i.e. the presence of an impulsive movement;
2. The trend moves in the direction in which the breakout occurred, i.e. the exclusion of a false breakout;
If these factors are met, then we can say that the breakout is real and it is worth looking for an entry point. Ideally, it should be like this:
Obvious consolidation above the control resistance by pivot points. Stop in this case is placed slightly below the breakout candle, take profits can be stretched by a grid between the Pivot points above. That is, if there was a trade, it would look like this:
✴️ LEVEL BREAKOUT STRATEGY
The strategy for level breakout should also be accompanied by some additional model. For example, it can be a pinbar, RSI divergence and so on. That is, you can choose many variants, the main thing is the presence of a reversal level nearby. In the simplest form, it should look like this:
As you might expect, there are 3 factors to enter the trade and not to buy here would be a much bigger risk than to stay on the sidelines. There is RSI divergence, there is double bottom by candlestick analysis, there is Pivot level, risk/profit ratio is very good. It looks like this:
✴️ CONCLUSION
The pivot point indicator is a great way to find trend reversal points and corrections, for example, you can combine it with Fibonacci levels and find out the end of a correction more precisely. Try it, trade, the indicator is very easy to use and understand. Successful trading and good luck in the markets!
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