In intraday trading, you can use various tools and techniques to find the best stock and choose the right level of buying and selling the underlying security. You can perform the technical analysis or use various other methods to analyse the stock price movement and find the best points to enter or exit from the trade positions with profitability.
The pivot point is one of the most popular tools you can use for intraday trading. However, traders use the pivot points not only for day trading but also for short-term trading to know the support and resistance levels of the market index or individual stocks. In this blog, we will discuss pivot points, how or whether they work for trading or not, how to calculate and use the pivot points in day trading with a pivot point intraday trading strategy.
What is Pivot Point in Intraday Trading?
Pivot points are one of the best technical tool for those who find it difficult to find support and resistance levels across time frame be it intraday or monthly.
While calculating pivot points, it leads you to finding support levels, which you will further understand in this blog.
And when price trades above or below these pivot points it gives the signal of uptrend and downtrend in the stock or in the market index. For intraday trading, you can use these pivot points to know the support and resistance levels for the day. And based on these crucial points you can decide the buying levels or define your intraday trading strategy.
Is Pivot Point Good for Trading?
On a standalone basis, no trading strategy is complete in itself but can be improved to provide better results. Likewise pivot points can be used to provide insights about the stock price movement. Picot points can be applied n daily, weekly and even longer time frame charts.
Not only pivot point let you know the support and resistant levels but also helps you identify the entry and exit points. It can be considered while trading and also help traders reduce their losses by choosing the right stop loss.
Does Pivot Point Trading Work?
Pivot points simply work on the basis of mathematical calculation taking the values from the share price movement. The multiple values taken from the stock price movement show the level of swing that a stock can achieve during the intraday movement.
It is kind of upper and lower ranges between that the price is likely to move depending on the market conditions. To calculate the pivot points you must have the essential price data like the open, high, lowand closing price of the last trading session of the stock.
How to Calculate Pivot Points in Intraday Trading?
Calculation pivot points are easy, if you know the formula and have all the data sets available. First you start by calculating pivot point and you move forward with support and resistance levels.
Data required to calculate Pivot Point:
High (H): The highest price stock touched in the previous trading session.
Low (L): The lowest price stock touched in the previous trading session.
Close ©: The closing price of the stock in the previous trading session.
Pivot Point Calculation Formula:
Pivot Point (PP)= (High+Low+Close) / 3
Summing up the high, low and closing prices and dividing the total by 3 will give you the pivot point of the stock based on the last trading session. Now using this pivot point you can calculate the other three support and resistance points.
