Using Pivot Points for Intraday Trading Made Simple

What is a Pivot Point in Trading?

A pivot point is a computation or technical analysis indicator that's utilized to ascertain the market's general trend throughout various time periods. The pivot point itself is just the preceding trading day's high, low, and closing prices averaged together.

 

Trading above the pivot point is often seen as a sign of continuous positive feelings the next day, while trading below the pivot point is supposed to suggest persistent pessimistic emotion.

 

What is the Significance of Pivot Point?

 

Pivot points can be useful intraday indicators for share trading. Unlike oscillators or moving averages, pivot points are fixed at the same prices throughout the day, setting them apart from other types of indicators. It is therefore simpler for traders to arrange their deals based on these predetermined levels.

 

This means that you can use S1, S2, or R1 and R2 as target prices or stop-loss levels. Additionally, pivot points are frequently used with other trend indicators by traders.

 

Intraday Trading: How to Open Using Pivot Points?

 

If the analysis of the previous day is above the pivot point, it is considered that the market will assume a bullish trend. On the other hand, if the analysis of the previous day is below the pivot point, it is believed that the market will go into a bear trend.

 

If an intraday trader has to go for a buy signal, then it would be appropriate when the particular stock has a bearish outlook and crosses the pivot support level R1. The support levels are below the basic pivot level, and the buyer starts at the support pivot of R2.  However, they vary from day to day, and there is no fixed sequence to move. It is all up to the intraday trader, depending on the total technical indication.

 

There are two fundamental ideas regarding pivot point trading strategy that assist intraday traders to have an understanding of how pivot point trading operates. These strategies are pivot point bounce and pivot level breakout.

 

Understanding Pivot Point Bounce

 

Pivot point bounce helps the trader determine when to buy the stock and when to sell it. This strategy is aimed at identifying a bounce in the prices at pivot points in the chart. When a particular stock reaches the pivot point this serves as a signal to open a particular trade and vice versa.

 

Now, it is the question of when to buy and when to sell employing the pivot point bounce strategy. In the pivot point bounce strategy, it is recommended that one should buy the stocks when there is a bounce on the upward side. Whereas if the opposite occurs, the stock experiences a downward bounce it’s time to sell the shares.

 

Among the important points, it is necessary to designate the correct place in the stop-loss order to minimize the losses. The stop loss order in intraday is based on the preference of how long the stocks are to be held. If the trader is targeting a short con, then the stop-loss is set above the pivot point. In contrast, if the trader is targeting a long hold, the stop-loss is set below the pivot point.

 

Understanding Pivot Level Breakout

 

This trade is realized with the assistance of the stop-limit order type, and the trader enters the position when the price gets through the pivot level. The short trade is made when the trend is down and takes a long position when the trend is up. In most cases, this trade is done in the morning and starts with a short trade and it is always worthy to position the stop-loss order threshold at an appropriate level to avoid any kind of loss.

 

The breakout trade mostly occurs during the morning trading session, and putting the stop-loss limit helps safeguard money in case of an unfavorable price shift. Before the breakout, it is possible to alter the stop-loss in a given position to manage the risk.

 

Conclusion

Pivot points are an excellent tool for determining areas of resistance and support. However, its greatest use is when paired with other forms of technical analysis. The best tip is to always incorporate a stop loss order to reduce risk as much as possible and that is not all. There are also pivot point calculator for intraday trading available for use, stock broking platform provide these calculators to users for their convenience while doing trading.