{"id":5673,"date":"2021-11-15T18:14:27","date_gmt":"2021-11-15T12:44:27","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=5673"},"modified":"2022-05-24T10:19:36","modified_gmt":"2022-05-24T04:49:36","slug":"pivot-point","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/pivot-point\/","title":{"rendered":"How To Use Pivot Point in Trading: Overview, Benefits, Calculation"},"content":{"rendered":"\n<p>As a trader, one is constantly looking at support and resistance levels for entering and exiting markets as well as planning advance strategies. But how do traders read and decipher complex tools? And what is the role of pivot points in formulating trading strategies? Let us dive in!&nbsp;<\/p>\n\n\n\n<p>Pivot points are a mathematically-backed technical indicator that uses data points of the previous day to predict trends and, more importantly, trend reversals.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/pivot-point\/#What-are-pivot-points\" title=\"What are pivot points?\">What are pivot points?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/pivot-point\/#Calculations-for-pivot-point\" title=\"Calculations for pivot point\">Calculations for pivot point<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/pivot-point\/#Intraday-trading-using-pivot-points\" title=\"Intraday trading using pivot points\">Intraday trading using pivot points<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/pivot-point\/#Pivot-point-breakout\" title=\"Pivot point breakout\">Pivot point breakout<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/pivot-point\/#Pivot-point-bounces\" title=\"Pivot point bounces\">Pivot point bounces<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/pivot-point\/#How-to-execute-trades-using-pivot-points\" title=\"How to execute trades using pivot points?\">How to execute trades using pivot points?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/pivot-point\/#Open-the-stockindex-chart\" title=\"Open the stock\/index chart\">Open the stock\/index chart<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tickertape.in\/blog\/pivot-point\/#The-waiting-game-begins\" title=\"The waiting game begins\">The waiting game begins<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tickertape.in\/blog\/pivot-point\/#Allow-the-price-to-trade-at-the-pivot-point\" title=\"Allow the price to trade at the pivot point\">Allow the price to trade at the pivot point<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tickertape.in\/blog\/pivot-point\/#Placing-targets-for-the-trades-entered\" title=\"Placing targets for the trades entered\">Placing targets for the trades entered<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.tickertape.in\/blog\/pivot-point\/#Benefits-of-trading-pivot-points\" title=\"Benefits of trading pivot points\">Benefits of trading pivot points<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.tickertape.in\/blog\/pivot-point\/#High-accuracy\" title=\"High accuracy\">High accuracy<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.tickertape.in\/blog\/pivot-point\/#Short-time-frames\" title=\"Short time frames\">Short time frames<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.tickertape.in\/blog\/pivot-point\/#Ease-of-use\" title=\"Ease of use\">Ease of use<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.tickertape.in\/blog\/pivot-point\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"what\"><span class=\"ez-toc-section\" id=\"What-are-pivot-points\"><\/span>What are pivot points?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>&#8216;Pivoting&#8217; in light of trading means reversing from support and resistance levels. Pivot points reveal those crucial data points where the market&#8217;s sentiments or the price movement in the underlying security are expected to change direction. They use the previous day&#8217;s close, low and high price to calculate the price to estimate support and resistance during the next trading session.&nbsp;<\/p>\n\n\n\n<p>Trading price above the pivot level indicates an ongoing bull run, while the trading price below the pivot point signifies a bear run. Traders use pivot points to decide their entry, exit, and stop losses in the market.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"calculations\"><span class=\"ez-toc-section\" id=\"Calculations-for-pivot-point\"><\/span>Calculations for pivot point<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>You can add the pivot point indicator to a trading chart and use the information yielded by it to trade in different time intervals. Alternatively, you can use the formula explained below to derive two support and resistance levels each.<\/p>\n\n\n\n<p><strong>Pivot point (P) = ( High + Low + Close)\/3<\/strong><\/p>\n\n\n\n<p><em>S1 =First support = (Pivot point x 2) &#8211;&nbsp; High<\/em><br><em>S2 =Second support = Pivot point &#8211; (High &#8211; low)<\/em><br><em>R1 =First resistance = (Pivot point x 2) &#8211; Low&nbsp;<\/em><br><em>R2 =Second resistance = Pivot point + (High &#8211; low)<\/em><\/p>\n\n\n\n<p><strong>Note:<\/strong> Different trading platforms present pivot point indicators with multiple support and resistance levels beyond two.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"intraday\"><span class=\"ez-toc-section\" id=\"Intraday-trading-using-pivot-points\"><\/span>Intraday trading using pivot points<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Pivot-point-breakout\"><\/span>Pivot point breakout<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It is observed that when a pivot point breakout takes place, the same is backed by volumes and continues in the breakout direction.&nbsp;<\/p>\n\n\n\n<p>So if you see a pivot point is being taken down from below on the upside, it establishes a bullish trend. This trend may continue, and traders may enter long positions keeping a <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-stop-loss\/\">stop loss<\/a> just below the pivot point.&nbsp;<\/p>\n\n\n\n<p>Similarly, when a bearish breakdown is observed on a pivot point, i.e., the price breaks the pivot point from above on its way down, the trend too may continue. Therefore, those with long positions may choose to exit or trade according to their risk appetite.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Pivot-point-bounces\"><\/span>Pivot point bounces<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In this technique, the price doesn&#8217;t break the pivot point but rebounds in the opposite direction after testing.&nbsp;<\/p>\n\n\n\n<p>Price bouncing back from a pivot point in the opposite direction is an indication that the price is respecting the pivot level and the trend is reversed. If this bounce from the pivot point is on the upside, it&#8217;s a possible cue for traders to enter buy positions. However, if the bounce is on the downside, traders may enter sell positions.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"how\"><span class=\"ez-toc-section\" id=\"How-to-execute-trades-using-pivot-points\"><\/span>How to execute trades using pivot points?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Open-the-stockindex-chart\"><\/span>Open the stock\/index chart<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>One can open multiple stock charts and apply pivot point indicators in each of them to identify the <a href=\"https:\/\/www.tickertape.in\/blog\/how-to-buy-share\/?utm_source=blog&amp;utm_medium=article\">stocks<\/a> approaching support or resistance levels.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The-waiting-game-begins\"><\/span>The waiting game begins<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Trading is all about patience and timely trades. Allow the price to approach the pivot point. For stocks in a <a href=\"https:\/\/www.tickertape.in\/blog\/bull-market-investing\/?utm_source=blog&amp;utm_medium=article\">bull run<\/a>, wait for them to make new lows close to the pivot point and for those in a <a href=\"https:\/\/www.tickertape.in\/blog\/don-fear-a-bear-market\/?utm_source=blog&amp;utm_medium=article\">bear run<\/a>, let them form new highs near the pivot point.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Allow-the-price-to-trade-at-the-pivot-point\"><\/span>Allow the price to trade at the pivot point<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Wait as long as the price doesn&#8217;t touch the pivot point. Then, when the price starts trading at the pivot level, you may choose to execute your trade.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Placing-targets-for-the-trades-entered\"><\/span>Placing targets for the trades entered<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>For long trades entered, you can aim for a target price near the first resistance level. However, those with a slightly higher risk appetite may aim for the second resistance level as well. If the stock manages to surpass the buying at the first resistance level, it is most likely to move towards the second resistance.&nbsp;<\/p>\n\n\n\n<p>For short trades, risk-averse traders should aim for the price to fall till the first support level and should place their targets near that price. Traders with slightly higher risk-bearing capacity can aim for the second support level as well.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"benefits\"><span class=\"ez-toc-section\" id=\"Benefits-of-trading-pivot-points\"><\/span>Benefits of trading pivot points<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"High-accuracy\"><\/span>High accuracy<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Pivot points take close, high and lows of stock into account thus considering the ongoing sentiments of the market-leading to impressive accuracy.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Short-time-frames\"><\/span>Short time frames<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>While most other technical indicators have &#8216;one-day time frames&#8217; as their base and are very rigid on the same, pivot point can work on shorter time frames like 15 minutes as well. Moreover, since pivot points give data for only one trading session, the information is highly precise and specific.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Ease-of-use\"><\/span>Ease of use<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Most trading platforms provide a pivot point indicator; hence the user need not use multiple applications for trading.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Pivot points are highly specific in determining the support and resistance levels, and one can trade relying on the information yielded by them. Pivot points help identify exact places where the trend reverses. Still, there&#8217;s no technical indicator with guaranteed success and it is always beneficial to implement multiple indicators to smoothen out the possibility of false signals.<\/p>\n\n\n\n<p class=\"has-text-align-center\"><em>Before ending this article, we\u2019ve got a special surprise for you! On account of Diwali 2021, we are gifting you a free <a href=\"https:\/\/www.tickertape.in\/blog\/tickertape-pro-features-for-advanced-investment-analysis\/\">Tickertape PRO<\/a> upgrade! Just sign up on&nbsp;<a href=\"https:\/\/www.tickertape.in\/?utm_source=blog&amp;utm_medium=article\" target=\"_blank\" rel=\"noreferrer noopener\">Tickertape<\/a>&nbsp;and avail the offer.<\/em><br><em>Go on, claim your free account now<\/em>!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Want to know how to use pivot point for predictions? Click here to know how to use pivot point for intraday trading and find out why it is a must for profitable trading!<\/p>\n","protected":false},"author":45,"featured_media":5027,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[9,1742],"tags":[972,252],"acf":[],"modified_by":"Anjali Chourasiya","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/10\/2.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/5673"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/45"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=5673"}],"version-history":[{"count":4,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/5673\/revisions"}],"predecessor-version":[{"id":8480,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/5673\/revisions\/8480"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/5027"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=5673"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=5673"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=5673"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}