How to Use Pivot
Points (SR Lines) for
Day Trading
Vivek Rattan
CeTA, 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 Calculation
Derived 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 Correction
CORRECTION
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Trend Trading with Pivot Points
DP
R
1
R2
S
1
S
2
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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