Indices Pivot Points

Pivot points is a set of indicators created by floor traders in the commodities markets to ascertain potential turning points, also referred to as 'pivots'. These points are calculated to identify levels in which the sentiment of the market trend could change from 'bullish' to 'bearish.' Indices traders use these points as markers of support & resistance.

These points are calculated as the average/mean of the high, low & close from the previous market session:

Indices Pivot Point = (High + Low + Close) / 3

Day traders use the calculated pivot-points to identify levels of entry, stops and profit taking, by trying to identify where majority of other traders might & may be doing the same.

A pivot-point is a price level of significance in trading analysis of a financial market that is used by the traders as a predictive indicator of price movement. It's calculated as an average of significant prices (high, low and close) from the performance of the market in the prior trading period. If prices in the following period trade above the center point it's usually evaluated as a bullish sentiment, whereas if trading price below central point is seen as bearish.

The central point is used to calculate additional levels of support & resistance, below and above central point, respectively, by either subtracting or adding price differentials calculated from previous ranges.

A pivot-point and the associated support & resistance levels are often turning points for the direction of price movement in a market.

In an up-trend, the pivot point and the resistance areas might represent a ceiling level for the market price. If price moving above this level the up trend is no longer sustainable & a trend reversal might occur.

In a down-trend, a pivot point & the support levels may represent a low for stock trading price level or a resistance to further decline.

The central pivot-point then can be used in calculating the support and resistance levels as follows:

Pivot points consist of a central point level surrounded by 3 support levels below it and 3 resistance areas above it. These points were originally used by floor traders on equity and futures exchanges because they provided a quick way for those traders to get a general idea of how the market was heading during the course of the day using a few calculations. However, over time they have also proved exceptionally helpful in other trading markets as well.

One of the reasons they are now so popular is because they are considered a 'leading' (or predictive) technical indicator rather than a lagging technical indicator. All that's required to calculate the pivot point levels for the upcoming (current) trading day is the previous day high, low, and close trading prices. The 24-hour cycle pivot points in this indicator are calculated according to the following formulas:

The center pivot then can be used in calculating the support and resistance levels as follows:

Resistance 3

Resistance 2

Resistance 1

Pivot Points

Support 1

Support 2

Support 3

Pivot Points Support and Resistance Levels - Stock Index Pivot Points Support and Resistance Zones

Pivot Points Support and Resistance Zones

Pivot Points as a Trading tool

The pivot point level itself represents a level of highest resistance/support, depending on the overall sentiment. If the market is direction-less ( range bound ) prices will often fluctuate greatly around this level until a price breakout develops and forms. Indices Prices above or below the central point shows the overall sentiment as bearish or bullish respectively. This indicator is a leading trading indicator that provides signals of potentially new highs or lows within a given timeframe.

The support & resistance levels calculated from the central pivot point & the previous market width may be used as exit points of the open trades, but are rarely used as entry signals. For examples, if the price is up-trending & breaks through the pivot point, the first or second resistance level is often a good target to close out a trade position, as the probability of resistance and reversal increases greatly, with every resistance area.

In pivot point analysis 3 levels are oftenly recognized above & below the central point. These are calculated from the range of price movement in previous period and then added to the central point for resistances & subtracted from it for support zones.

Pivot Points

Pivot levels can be utilized in many various different ways. Here are a couple of the most often techniques for utilizing them:

Indices Trend Direction: Combined with other analysis techniques/methods like over-sold/over-bought oscillators, volatility measurements, etc., the center point may and might be helpful and useful in determining the general and overall trending direction of the price. Trades are only opened in direction of the market price trend. Buy trade positions occur only when the price is above the central point and sell stock trades occur only when price is below the central pivot points.

Index Price Break-outs: In trading price breakouts, a bullish buy signal forms when the price breaks up through the center point or one of the resistance areas (typically Resistance Zone 1). A short sell signal happens when trading price breaks downward through the center point or one of the support levels (mostly Support Zone 1).

Indices Trend Reversals: In trend reversals, a buy signal forms when price moves towards a support zone, gets very close to this point, touches this point, or only moves a little through this point, & then reverses & starts moving in the other direction.

To download Pivot points Indicator:

https://c.mql5.com/21/9/pro4x_pivot_lines.mq4

Once you download the trading technical indicator. Open it with the MQ4 Language MetaEditor, Then Compile the technical technical indicator by pressing the Compile Button and it'll be added to your MT4.

NB: Once you as a trader add it to your MT4, the trading indicator has additional lines named MidPoints, to remove the additional lines open MQ4 Meta Editor(short-cut keyboard key - press F4), and change line 16 from:

Extern bool mid-pivot = true:

Extern bool midpivot = false:

Then Click Compile button again, & the indicator will then be shown such as illustrated on www.tradestockindices.com website.

Study More Lessons and Topics:

Trade Stock Indices

Indices Pivot Points

Pivot Points as a Trading tool

Pivot Points