Calculating your Pivot Points

Calculating your Pivot Points

Pivots are significant levels to determine directional movement
Used to determine support and resistance
They are LEADING INDICATORS
Originally used by floor traders with a short term focus

We will look at 3 types:

Standard Pivot Point
Fibonacci Pivot Point
Demark Pivot Point

Pivot Point Terms
Period – the time frame you are calculating
High
Low
Close
Open
The Pivot Point – BASE
Support 1 – S1
Support 2 – S2
Resistance 1 – R1
Resistance 2 – R2…

RULE – These levels would be used during the following period, once set they do not change

Standard Pivot Point

Begin with the BASE PIVOT POINT
This is the simple average of the periods high, low & close
Formula
Pivot Point (P) = (High + Low + close)/3

P of CFR for the 19/03/2014 (based on 18th)
P = (10319 + 10070 + 10237)/3
CFR P for 19th = 10208

Next calculate the SUPPORT 1 & 2

Support 1 (S1) = (P x 2) – High
CFR S1 = (10208 x 2) – 10319
CFR S1 = 10097

Support 2 (S2) = P – (High – Low)
CFR S2 = 10208 –(10319 – 10070)
CFR S2 = 9959

Next calculate RESISTANCE 1 & 2

Resistance 1 (R1) = (P x 2) – Low
CFR S1 = (10208 x 2) – 10070
CFR S1 = 10346
Resistance 2 (S2) = P – (High – Low)
CFR S2 = 10208 +(10319 – 10070)
CFR S2 = 10457

Conclusion of CFR Pivot Points

R2 10457
R1 10346
Base 10208
S1 10097
S2 9959

Trading with Pivot Points

Pivot Point (P) sets the tone for price action
A move above (P) is positive and shows strength
With target at first Resistance (R1)
A break above (R1) sets the target to (R2)
Converse is true on the downside
Below (P) shows weakness with target (S1)
Breaching (S1) shows more weakness to (S2)

Support & Resistance Pivot Points

Use just like traditional support and resistance levels
Watch price action closely when levels come into play
If prices decline to support and then firm, look for a bullish chart pattern or indicator to confirm reversal
The same on the upside – look for bearish pattern for reversal from resistance

Conclusion
Start with direction of crossover (P)
Confirm with other aspects of technical analysis
RSI – Stochastic – MACD – Williams R%

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