Pivot Points Decoded: Crypto Trading Insights for Beginners

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. 

1. Pivot Points: A Simple Definition

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. 

2. Pivot Points: Know The Calculation

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.

3. Launching Pivot Points on A TradingView Chart: A Step-By-Step Guide

To launch Pivot Points on a TradingView chart, follow these steps:

• Sign in to your TradingView account
• Open the chart for the cryptocurrency you want to analyse
• Click on the ‘indicators’ button situated in the top left corner
• In the search bar, type ‘Pivot Points’ or ‘Pivot Point Standard’ and select it
• Customise the Pivot Points settings if needed. You can choose different levels, styles and colours.
• Once customised, the Pivot Points will appear on your chart, showing support and resistance levels
• Start analysing the chart using Pivot Points to identify potential price levels and market trends

4. Pivot Point Lines: What you Should Know

When you launch the Pivot Point indicator, you will notice a few lines on your chart:

• Pivot Point: This is like the center point.
• Resistance 1 (R1) and Support 1 (S)): These are the first levels above and below the P. R1 is a potential target if the price is rising, and S1 might act as support if the price is falling.
• Resistance 2 (R2) and Support 2 (S2): These are the next levels beyond R1 and SI. If the price moves beyond R1 or S1, R2 and S2 can serve as further targets or support.
• Resistance 3 (R3) and Support 3 (S3): These are additional levels, often used by traders for more extended trends.

There can be additional Support and Resistance Lines beyond S3 and R3. The general function of these lines are the same. 

5. Analysing What Pivot Points Tells

Let’s dive into how you can make analyses with Pivot Points 

• Support and Resistance Levels

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.

• Bullish or Bearish Signals

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.

• Price Targets

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.

• Intraday Guidance

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. 

Also Read: Ichimoku Cloud Basics for Crypto Trading Beginners

6. Endnote

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.