Pivot Points Analysis and Pivot Point Trading Signals
This indicator consists of a central pivot which is surrounded by 3 resistance levels below and 3 support levels above.
Initially these points were used by floor traders to analyze & trade the equities & futures markets. This indicator is considered to be leading rather than lagging.
Pivots provide a quick way for stock traders to analyze the general trend of how the market is going to be moving during the course of the day. A few simple calculations are used to plot the resistance and support levels.
To calculate these points for the coming trading day is the previous day's
- high,
- low, and
- close prices are used
The trading day closes & this daily closing time is when the indicator is updated.
The 24-hour cycle for this indicator are calculated using a complex formula. The central pivot is then used to calculate the support & resistance areas as follows:
Resistance 3
Resistance 2
Resistance 1
Pivot Point
Support 1
Support 2
Support 3
Indices Analysis and Generating Trade Signals
This indicator can be used in different ways to generate signals. The following methods are the most common technical analysis:
Indices Trend Identification Signals
The central pivot is used by stock traders to determine the general market trend direction. The trades taken will only be in direction of the market trend.
- Buy signal - stock trading price is above the central point
- Sell signal - stock trading price is below the central point
Indices Price Break-out Signals
Indices Price break out signals are generated as follows
- Buy signal- is generated when the price breaks upwards through the central point.
- Sell signal- is generated when the price breaks-out downward through the central point.
Indices Price Break-out
Indices Price Reversal Signal
Indices Price reversals are generated as follows
Buy Signal- when trading price moves down towards one of the support area, then touches the support or moves slightly through it then quickly reverses and moves upwards.
Sell Signal- when trading price moves up towards one of the resistance level, then touches the resistance or moves slightly through it then quickly reverses and moves downwards.
Indices Price Reversal Signal
Setting Stop loss & Limit Profit Values
The central pivot and the other support and resistance levels are used by stock traders to determine suitable stop loss and limit profit levels.
Setting Stop loss & Limit Profit
If a buy is placed above the central point the Resistance 1 or Resistance 2 can be used to set the take profit level, and the Support 1 can be set as a StopLoss Order Zone for the trade.
To download Pivot points Indicator:
https://c.mql5.com/21/9/pro4x_pivot_lines.mq4
Once you download the indicator. open it with the MQL4 Language Meta Editor, Then Compile the indicator by pressing the Compile Button and it'll be added to your MT4.
NB: Once you add it to your MetaTrader 4, the technical indicator has additional lines named Mid-Points, to remove the additional lines open MQL4 Meta Editor(short cut keyboard key - press F4), and change line 16 from:
Extern bool midpivot = true:
To
Extern bool midpivot = false:
Then Click Compile button again, and the indicator will then appear as illustrated on this site.
