Classical Pivot points

Classical pivot points are a popular type of technical analysis tool used by traders to identify potential levels of support and resistance. They are calculated using the high, low, and close prices of the previous trading session, and are used to determine potential levels of support and resistance for the current trading session.

To calculate pivot points, you can use the following formula: Pivot Point = (High +Low+ Close) / 3

Once you have calculated the pivot point, you can then calculate the levels of support and resistance as follows:

• First level of support = 2 x Pivot Point - High of previous session

• Second level of support = Pivot Point - (High - Low) of the previous session

 • Third level of support = Low of previous session - 2 x (High - Pivot Point)

 • First level of resistance = 2 x Pivot Point - Low of previous session

 • Second level of resistance = Pivot Point + (High - Low) of previous session

• Third level of resistance = High of previous session + 2 x (Pivot Point - Low)

As a general guideline, a stock can be considered bullish above the pivot point and bearish below the pivot point. However, it's important to remember that pivot points are just one indicator and should be used in conjunction with other technical analysis tools and market data to make informed trading decisions.

As a trader, you can use pivot points to help determine potential levels of support and resistance for a given trading session. These levels can then be used to help identify entry and exit points for trades.

Here are a few ways you can use pivot points for entry and exit:

Trading the breakout: One common strategy is to wait for the price to break through a level of support or resistance identified by the pivot points. For example, if the price breaks through a level of resistance, you may consider entering a long position. Conversely, if the price breaks through a level of support, you may consider entering a short position.

Trading the bounce: Another strategy is to look for price action to bounce off a level of support or resistance identified by the pivot points. For example, if the price approaches a level of support and begins to bounce higher, you may consider entering a long position. Conversely, if the price approaches a level of resistance and begins to bounce lower, you may consider entering a short position.

Trading the range: Pivot points can also be used to help identify potential range-bound trading opportunities. If the price is trading within a range between the first level of support and the first level of resistance, you may consider buying at the support level and selling at the resistance level. You could also consider selling short at the resistance level and buying back at the support level.

Remember, pivot points are just one tool in a trader's toolkit, and should be used in conjunction with other technical and fundamental analysis to make informed trading decisions. It's important to note that pivot points are not a guarantee of market direction and should be used in conjunction with other technical indicators, such as moving averages, trend lines, and volume analysis, to confirm trading signals. Additionally, it's important to always use proper risk management techniques to minimize potential losses.

In addition to the classical pivot points, there are several other types of pivot points that traders use. Some of the most popular ones include:

Fibonacci Pivot Points: These pivot points are based on Fibonacci levels instead of the previous session's high, low, and close prices. Fibonacci pivot points use the same formula as classical pivot points, but the levels of support and resistance are based on Fibonacci ratios.

Camarilla Pivot Points: Camarilla pivot points were developed by a trader named Nick Scott in the 1980s. These pivot points use a different formula than classical pivot points and emphasize the importance of the previous day's opening price. Camarilla pivot points are believed to be especially useful for day traders.

Woodie's Pivot Points: Woodie's pivot points were developed by a futures trader named Tom Wood in the 1980s. These pivot points use a different formula than classical pivot points and emphasize the importance of the previous session's trend. Woodie's pivot points are believed to be especially useful for traders who focus on trends.

DeMark Pivot Points: DeMark pivot points were developed by a trader named Tom DeMark in the 1990s. These pivot points use a different formula than classical pivot points and emphasize the importance of the current period's opening price. DeMark pivot points are believed to be especially useful for traders who focus on short-term price movements.

Each type of pivot point has its own unique characteristics and can be used in different trading scenarios. It's important for traders to experiment with different pivot point types and find the ones that work best for their trading style and goals.

https://myequitylab.com/user/markets/pivot-points/017023929.00026005001