What is pivot points in stock market trading?

 Hello friends lets understand one more Topic.

What is pivot points in stock market trading?

Pivot points are a technical trading tool used to identify support and resistance levels. They are based on the concept of "support" and "resistance".

Pivot points are one of the most popular indicators in forex trading. They are used to identify potential turning points in the market and make predictions about future price movements.

Some traders use pivot points as a way to forecast upcoming price movements while others use them as a way to enter or exit the market.

Pivot points plays a crucial role in stock market trading. It is calculated based on the previous day trading session data like high, low and close price of the instrument. Pivot point calculation gives the pivot point, three support points & resistance points of the instrument for the next trading session. With the help of pivot points, we can predict the price movement of an instrument whether the price will go up to that level or hold at that level or reversal of the price from that level. Most of the time pivot point’s support points works as a major support zone as well as pivot point’s resistance points as a major resistance zone.

How Does Pivot Point Trading Work.

Pivot point trading is a type of stock day trading that is based on the calculation of pivot points. These are specific numbers that are calculated by taking into account the previous day’s high, low, and close prices. The pivot point trading strategy involves buying when prices break out from the pivot point range and selling when they fall back into it.

How are pivot points calculated?

Pivot points are calculated based on the previous day trading session data like day high, day low and day closed price of a particular instrument (stock or indices) to get the pivot point, resistance points and support points of the next trading session.

What is the formula for calculating Pivot Points?

The formula for calculating Pivot Points is as follows: -

Pivot Point = (high + low + closed)/3

Resistance 1 = Pivot Point x 2 – low

Resistance 2 = Pivot Point + (high – low)

Resistance 3 = high + 2 x (Pivot Point – low)

Support 1 = 2 x Pivot Point – high

Support 2 = Pivot Point – (high – low)

Support 3 = low – 2 x (high – Pivot Point)

For Daily Pivot Point calculation - High, low and close price of the particular instrument for the previous DAY trading session date are to be considered.

For Monthly Pivot Point calculation - High, low and closed price of the particular instrument for the previous MONTH trading session date are to be considered.

How pivot point calculator is useful in planning of trades for the next trading session?

Pivot points is an indicator tools in a trading platform. It can be found easily and freely on every platform. But, after the market has been closed for the day, we cannot find the next day’s pivot points levels in the platforms until the next day trading session starts. To plan the trade in advance, with the help of this calculator, we can easily find out the levels of pivot points, support zones and resistance zones in advance. If we can find the levels in advance then, we can plan the trades accordingly.

What Are the Benefits of Using Pivot Points in Trading?

Pivot points are a technical analysis tool that are used to predict the price movement of a security. They help traders by providing support and resistance levels and can be used to determine what the most likely price movement will be in the future.

The pivot point calculator is a tool that can be used to calculate the pivot points for any given stock. The pivot point calculator takes into account historical data about the stock, such as volume and volatility, in order to calculate where the next potential support or resistance level may occur.

There are four main reasons why pivot points should be part of your trading strategy:

They provide a level of predictability in the market.

They are easy to understand.

They provide a way to make money even if the market goes down.

They can be used as an exit point for your trade.

The Best Way to Carry Out Trade Using the Pivots

To summarize, the best way to carry out Forex trade using the pivots is:

Identify a pivot.

Wait for the pivot to be confirmed by a price reversal or an increase in volatility.

Enter a position on the opposite side of the pivot and set a stop loss and take profit levels.

Exit your position when you reach your take profit level or when you hit your stop loss level.

wise investing            

Grow with learning.