how to use pivot points in day trading

How to Use Pivot Points (SR Lines) for Day Trading

Vivek RattanCeTA, MBA

1

Pivot Points⇨ Provide good reference points at which to enter or exit.

⇨ Gives an indication of the market bias. (Bullish, Bearish, Neutral).

⇨ Can be used to identify future support and resistance levels.

⇨ Are used to identify trading ranges.

⇨ Can be used for any time frame.

2

Pivot Points

3

Pivot Points

4

Advantages of Pivot Point Trading⇨ Provides key inflection points.

⇨ Which are used to determine when to enter the market, place stops and take profits.

⇨ Helps minimize risk.

⇨ Can predict next day trading ranges.

5

Terminology⇨ Pivot : is a level at which the current market direction for the

day changes. Market trading above pivot point is seen as

bullish whereas trading below the pivot point is seen as

bearish.

⇨ Resistance : is a point where sellers start to outnumber

buyers.

⇨ Support : is a point at which lots of buyers tend to enter the

stock.

6

Pivot Points / SR Lines

"Above DP : Bullish Sentiment"

"Below DP : Bearish Sentiment"

7

Role Reversal

8

Role Reversal

9

Pivot Points CalculationDerived from previous day's High, Low & Close price values.

R2 = Pivot + (High - Low)

R1 = (2 * Pivot) – Low

DP = (High + Low + Close) / 3

S1 = (2 * Pivot) – High

S2 = Pivot - (High - Low)

10

Placing Stops & Targets

11

Pivot Points can be used by :

Range Breakout and

Trend traders.

12

Range Trading with Pivot Points

SELL, if the price is near resistance level, & place a stop just above the resistance.

BUY, if the price is near support level & place a stop just below the support.

Fast, easy & effective way to determine your Risk-Reward ratio.

13


14


15

Breakout Trading with Pivot Points◉There are mainly two approaches to

trading the breakouts :

◉ Initial Breakout

◉Correction

16

Breakout Trading with Pivot Points

17


18


19

Placing Stop with Initial Breakout

20


21


22


23


BUY

BUY

24


25


26

Placing Stop with Correction

27

Placing Stop with Correction

SHORT SELL ??

28

Placing Stop with CorrectionCORRECTION

29

Trend Trading with Pivot Points

DP

R1

R2

S1

S2

Prices opened above DP & stayed above it the whole day.

30


Prices opened below DP & S1, signifying bearish sentiment.

31


32

High Probabilistic Setup using Candlestick Pattern & Pivot Point

BUY HERE & PLACE STOP BELOW DOJI.

33

High Probabilistic Setup using Candlestick Pattern & Pivot Point

34

Conclusion⇨ Think of pivot points as a new weapon in your trading arsenal.

⇨ Use them to : ◉ predict the next day's trading range◉ get an idea of entry / exit points ◉ know the day's bias

⇨ Use pivot points along with other technical analysis tools such as candlestick, MACD, RSI, etc.

35

Reference◉Book : "Candlestick and Pivot Point

Trading Triggers" by John Person

36

That's it !Questions?Suggestions!

37

how to use pivot points in day trading

Documents