When someone asks us to name indicators ideal for intraday trading, one of the first names that comes to mind is the Pivot Point. This indicator is exceptionally popular and stands out for its forward-looking capabilities. Let’s delve into the details of this unique indicator.
A Pivot Point is a fundamental tool used for technical analysis. It assists crypto traders in assessing the market’s general direction over different time frames. Essentially, it calculates the average of the highest price, lowest price and the closing price from the previous trading day.
Calculating a Pivot Point is simpler than it might sound. Here is the formula for calculating the Pivot Point:
Pivot Point (PP) = (High + Low + Close) / 3 |
This formula involves adding the highest price (High), the lowest price (Low), and the closing price (Close) from the previous trading day, and then dividing the sum by three to find the Pivot Point.
A Pivot Point acts like a central reference point, helping you understand if the current price of the cryptocurrency is likely to go up or down.
To launch Pivot Points on a TradingView chart, follow these steps:
When you launch the Pivot Point indicator, you will notice a few lines on your chart:
There can be additional Support and Resistance Lines beyond S3 and R3. The general function of these lines are the same.
Let’s dive into how you can make analyses with Pivot Points
Pivot Points provide key levels. If the price is below the Pivot Point, it might face resistance when trying to go up. If it is above the PP, it could find support when trying to go down.
Look at the price in relation to the PP. If it is above, that is a bullish signal. If it is below, it is a bearish signal. This helps you understand the market’s mood.
Pivot Points offer you potential price levels. If you are considering buying, aim for levels above the PP. If you are thinking of selling, target levels below the PP.
For day trading, focus on the PP, and two other levels: RI (the first resistance level) and SI (the first support level). If the price is near S1 and heading up, it could be a good time to buy. If it is close to R1 and heading down, it might be a good time to sell.
Pivot Points is a crucial tool for crypto trading beginners. It can help you measure market direction, identify support and resistance levels and make informed trading decisions. However, it is important to note that it is not foolproof and may have limitations in complex market conditions. Always use then as part of a comprehensive trading strategy.
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