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How to Use Pivot Points (SR Lines) for Day Trading
Vivek RattanCeTA, MBA
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Pivot Points⇨ Provide good reference points at which to enter or exit.
⇨ Gives an indication of the market bias. (Bullish, Bearish, Neutral).
⇨ Can be used to identify future support and resistance levels.
⇨ Are used to identify trading ranges.
⇨ Can be used for any time frame.
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Pivot Points
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Pivot Points
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Advantages of Pivot Point Trading⇨ Provides key inflection points.
⇨ Which are used to determine when to enter the market, place stops and take profits.
⇨ Helps minimize risk.
⇨ Can predict next day trading ranges.
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Terminology⇨ Pivot : is a level at which the current market direction for the
day changes. Market trading above pivot point is seen as
bullish whereas trading below the pivot point is seen as
bearish.
⇨ Resistance : is a point where sellers start to outnumber
buyers.
⇨ Support : is a point at which lots of buyers tend to enter the
stock.
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Pivot Points / SR Lines
"Above DP : Bullish Sentiment"
"Below DP : Bearish Sentiment"
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Role Reversal
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Role Reversal
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Pivot Points CalculationDerived from previous day's High, Low & Close price values.
R2 = Pivot + (High - Low)
R1 = (2 * Pivot) – Low
DP = (High + Low + Close) / 3
S1 = (2 * Pivot) – High
S2 = Pivot - (High - Low)
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Placing Stops & Targets
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Pivot Points can be used by :
Range Breakout and
Trend traders.
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Range Trading with Pivot Points
SELL, if the price is near resistance level, & place a stop just above the resistance.
BUY, if the price is near support level & place a stop just below the support.
Fast, easy & effective way to determine your Risk-Reward ratio.
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Range Trading with Pivot Points
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Range Trading with Pivot Points
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Breakout Trading with Pivot Points◉There are mainly two approaches to
trading the breakouts :
◉ Initial Breakout
◉Correction
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Breakout Trading with Pivot Points
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Breakout Trading with Pivot Points
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Breakout Trading with Pivot Points
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Placing Stop with Initial Breakout
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Placing Stop with Initial Breakout
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Placing Stop with Initial Breakout
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Breakout Trading with Pivot Points
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Breakout Trading with Pivot Points
BUY
BUY
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Breakout Trading with Pivot Points
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Breakout Trading with Pivot Points
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Placing Stop with Correction
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Placing Stop with Correction
SHORT SELL ??
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Placing Stop with CorrectionCORRECTION
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Trend Trading with Pivot Points
DP
R1
R2
S1
S2
Prices opened above DP & stayed above it the whole day.
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Trend Trading with Pivot Points
Prices opened below DP & S1, signifying bearish sentiment.
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Trend Trading with Pivot Points
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High Probabilistic Setup using Candlestick Pattern & Pivot Point
BUY HERE & PLACE STOP BELOW DOJI.
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High Probabilistic Setup using Candlestick Pattern & Pivot Point
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Conclusion⇨ Think of pivot points as a new weapon in your trading arsenal.
⇨ Use them to : ◉ predict the next day's trading range◉ get an idea of entry / exit points ◉ know the day's bias
⇨ Use pivot points along with other technical analysis tools such as candlestick, MACD, RSI, etc.
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Reference◉Book : "Candlestick and Pivot Point
Trading Triggers" by John Person
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That's it !Questions?Suggestions!
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