Pivot Point in Trading
Trading is not all about buying when support comes in and selling when resistance. It is a whole new world and have several entities that helps a person in trading. It doesn’t matter if you are a novice trader or a professional trader, these entities needs to be understood and used when time comes. What is pivot? In context to trading, pivot is a point around which the market plays ups and downs for a particular period. Or in other words, Activities of a market are dependent on a point known as Pivot point.
Technically, Pivot point at a particular point(day) can be calculated as
Pivot point = Average values of HIGH, LOW and CLOSE of the previous candle(day)<
As, you can see in the chart, the pivot point will be equal to
Pivot Point = (HIGH + LOW + CLOSE)/3
This pivot value is calculated for a particular day using the previous day candle. If the market holds that pivot point then market will go upwards and else it will go downwards.
Based on this pivot point certain other things like Support Levels and Resistance Levels can be calculated. Support level is a level where the market is supported and Resistance levels is a level where the market faces obstacles. Some of the traders use the pivot point to sell, stop loss or buy stocks. Well, I am still a learner and according to me the pivot point should not be treated as a fixed point to buy, sell or stop loss. It should be considered to learn about Support and Resistance levels in a market and accordingly develop strategies.
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