Pivot points

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Pivot Points

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Disclaimer

• Trading carries significant risk of losses and may not be suitable for all investors. Traders should assess these risks either themselves or in consultation with a financial advisor before investing.

• There is no guarantee that the trading techniques, methods and other information in this presentation will result in profits. The content in this presentation in only intended for educational and informational purposes and not intended as trading recommendation.

• The content of this presentation is subject to change without notice.

• Stockstream Financial Advisory Services LLP or mystockstream.com will not take any liability or accountability of losses arising from the use of information in this presentation in any manner.

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Introduction

• Pivot points provide support and resistance levels for a particular trading period. For example, if you are using daily charts you will get daily pivots, hourly charts will give hourly pivots, etc

• Pivot Points were conceived when there were no electronic systems and were used by pit traders.

• Pivot Points are leading indicators of price action.

• Pivot points are calculated using price data for the previous trading period.


Description

• Central pivot (PP) is the determinant of the trend for the particular period.

• If price opens above the central pivot look for opportunities to buy and vice versa.

• R1, R2 and R3 are points of resistance if the price moves higher.

• S1, S2 and S3 are points of support if the price moves lower.

• M0-M5 are mid points between the support and resistance levels. They act as intermediate support or resistance depending on their location below or above PP


Strategy 1: Continuation

• Trading strategy (Long):

• Determine the broader trend. If it is higher look for buy opportunity and vice versa.

• If price for the trading period opens above PP look to buy tests of PP or M2.

• Stops: Placed below the low from the test of PP or M2.

• Targets:• If we get a bounce after a test

of PP target R2• If we get a bounce after test of

M2 target M4


Strategy 2: Reversal

• Trading strategy (Long):

• Determine the broader trend. If it is higher look for buy opportunity and vice versa.

• If price for the trading period opens below PP look to buy tests of M1 or S2.

• Stops: Placed below the low from the test of M1 or S2.

• Targets:• If we get a bounce after a

test of M1 target M3• If we get a bounce after test

of S2 target PP


Example

• Strategy 1: • Broader market trend is up. Look

for buying opportunities.• For both (B) and (C) price opens

above PP. • Then price falls down to test M2

for (B) and PP for (C). • After the test price bounces higher

to reach targets of M4 for (B) and R2 for (C).

• Strategy 2:• Broader market trend is up. Look

for buying opportunities.• For (A) price opens below PP. • Then price falls down to test M2.• After the test price bounces higher

to reach targets above PP.


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Pivot points

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