If you are into stock markets, you may have heard of Pivot Points. But, do you know what it is? It is nothing but a price indicator and it has been seen that most floor traders take benefit of this type of trading. Pivot Point is generally used for the prediction of stock market trends. In the method of Pivot Point Trading, people use the data of the previous period's price data to predict future support. This technical analysis indicator determines whether the stock market is bullish or bearish. If the price for a particular share is above the pivot line, the market situation is considered bullish, otherwise, it is bearish.
Calculation of Pivot Point Trading
People generally use the five-point method to find the main pivot
point. To calculate this value the stock market experts use five price points-
2 resistance levels, 2 support levels, and the previous day's high, low and
close price. In simple words, the formula of the pivot point is one-third of
the sum of the previous high, previous low, and previous close. You can
calculate this pivot point following a different formula. The one-fourth of the
sum of today's opening, yesterday's high, yesterday's low, and yesterday's
closing also give the same value of pivot point. For this calculation, you can
collect the data from Bollinger Bands.
Different types of Pivot Points
Do you know that there are five types of Pivot Point trading?
These are standard pivot point technique, Fibonacci Pivot Point technique,
Woodie's pivot point technique, Camarilla Pivot Point technique, and Demark
Pivot Point technique. Of these, the standard pivot point technique is the
easiest one and the Fibonacci one is the most popular one.
The technical analysts generally draft a price action graph for
the pivot point. Once the line reaches the pivot point there can be two options
only – either supported/resisted or extended breakouts. If you join a course on
"how to invest in share market", you will get to know about
pivot point breakout trading, pivot point bounce trading, etc. in detail. If
you are wishing to do the technical analysis of your stock portfolio yourself,
you will need to have a solid knowledge of pivot points. So far, there is no
better way in the market to determine the support area and resistance area of
the price chart than the pivot point. So, learn these basic things about
the stock market and start investing today.
