Pivot point
The pivot point is a very good technical indicator used by traders and market makers to analyze market trends pivot point is used mostly by traders for inter-day trading which means traders take advantage of short market movement and take significant profit from the market highs and lows.
In general terms pivot point are support/resistance areas in a trading chart that show the trading possibility of market trends.
It can be used to guide traders when and how they should react to market trends.
It's also used to show traders' technical support and resistance level of a market.
Details about Pivot Point Levels
There are three basic acronyms for pivot point levels.
PP which stands for pivot point
S which stands for support
R which stands for resistance
PP for a neutral chart shows market high and low here the pp point is placed in between the market high and low the pp point will be used to guide a trader whether to open or closed a trade daily.
It is also seen as the main pivot point in the middle of a chart.
S which is the support level indicator is used to show a trader when a particular coin/currency is oversold and in turn, there is a possible price reversal for buyers to start dominating the market.
R here the resistance level shows price overbought and there could be high chance buyers will be getting weak and sellers dominating the market.
With the above point pivot point have a different level with the PP point in the middle unless there is high or low price movement which can change the position of the PP level.
Subsequent point in the pivot point includes the following
R1, R2, R3 resistance 1, 2, 3 showing price overbought here there is no such certainty for the price movement there can be price reversal anytime and the sellers could take over the market. there are other R's that can be included in the pivot point chart depending on how many a trader wants on his trading view chart.
S1, S2, S3 support 1 to 3 although a trader can add more support level on his trade here it shows price oversold with various support level it can reach before reversing on a particular market trend.
S1 on pivot point shows the first support level immediately below the PP point
S2 It's the support level below the support 1
S3 also shows the 3 support level below the support 2
R1 is immediately above the main PP and it is the first resistance level
R2 second resistance level above R1
R3 third resistance above R2
Pivot Point Calculation and R1 R2 S1 S2 Pivot Levels Calculation.
To calculate pivot point support and, resistance traders need to take into consideration the last trading session open, high, low, and close.
To calculate PP = high + low + close divided by 3
In other to calculate S1 and S2 we use the formula
S1 = (PP × 2) - high
S2 = PP - ( high - low )
To calculate R1 and R2 we use the formula
R1 = ( PP × 2 ) - low
R2 = PP + ( high - low )
How to Apply Pivot Point on Chart. (Screenshot with tag your name)
To apply pivot point I will be using the poloniex exchange trading platform.
Step one; log in to your trading account
Step two; click on exchange I will be using BTC/USDT pair
Step three; click on the indicator icon
and search for the pivot point
which will be shown by clicking on the pivot point once it will be shown on my trading chart.
How Pivot Points Work. (Screenshot with tag your name)
From the chart above of the BTC/USDT pair, it can be seen the market trend is on a bearish pattern.
S1, S2, and S3 are below the main pivot point P showing there is price oversold in the market.
Any moment there could be a price reverse as sellers have been dominating the market for a few days.
Here it can be seen that the pivot point is very useful as a trading technical indicator it works to show traders who are dominating the market the support level also shows traders how and when to take profit in other to exit the market and make entry.
Pivot Point Reverse Trading. (Screenshot with tag your name)
Above is a screenshot indicating price overbought which shows when there is a price overbought pivot point is below R and there will be a market reversal since no market can remain bullish here buyers can begin to start taking profit and exit trade.
Note the above chart are all set to 30 minutes trade since most pivot point works with daily trading.
What could be a common Mistakes in Trading with Pivot Points
Not having a prior understanding of how pivot point indicator works on charts will be one of the major mistakes a trader can make when trading.
Secondly when a trader decides to use the pivot point indicator for long-term trading can be another mistake to use it for long-term trade will not be of many benefits to the trader so a trader should always note that the pivot point indicator is most suitable for day trading.
Another mistake that could be made when using a pivot point indicator is when a trader forgets to use stop loss on his opened position which loss of more funds or getting liquidated.
What could be the reasons For Pivot Points is Good. (Pros/Advantages)
Advantages of the pivot point
Help traders to identify support and resistance points in a trending market.
Help traders to be able to take profit make entry and place stop loss in a trade
It can be used by day traders to maximize problem and loss
Apply the Pivot Points indicator in the Today chart (the day when you making this task) and set the chart for 15 minutes. Explain the market trend till the time of writing the task and how it will be next till the end of the day. You can give possibilities on both the side bearish and bullish.
Setting my chart to 15 minutes I will still be using the BTC/USDT pair
From the above chart, the first pivot point indicator for the pair shows a bullish market tried as the buyers overtook the market.
The last frame shows a bearish market trend as the seller took over the market.
weekly price forecast for BTC/USDT
Sentiment and fundamental
Using market sentiment which seems to be a major factor in the crypto space in the previous week forecasting the price of BTC base on sentiment can be very bearish since there are still lots of FUD going on in the market so for weekly analysis BTC pairs will be bearish for the week except bullish news comes up within the week.
Technical analysis
Using the reversal analysis method it can be seen BTC has been in a downtrend is forming a U shape which shows there could be a price reversal making BTC bullish.
Conclusion
Trading can be very fun as well as very complex it requires a lot of practice and hard work technical indicator tools like a pivot point indicator can help traders to understand some basic market movement as well as maximize profit by making the right entry in any market position and setting a proper stop loss.
All screenshots were taken from my poloniex and Kucoin exchange trading application.
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