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How to Use Pivot
Points (SR Lines) for
Day Trading
Vivek Rattan
CeTA, MBA
1
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.
2
Pivot Points
3
Pivot Points
4
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.
5
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.
6
Pivot Points / SR Lines
"Above DP : Bullish Sentiment"
"Below DP : Bearish Sentiment"
7
Role Reversal
8
Role Reversal
9
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)
10
Placing Stops & Targets
11
Pivot Points can be used by :
Range Breakout and
Trend traders.
12
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.
13
Range Trading with Pivot Points
14
Range Trading with Pivot Points
15
Breakout Trading with Pivot
Points
There are mainly two approaches to
trading the breakouts :
◉Initial Breakout
◉Correction
16
Breakout Trading with Pivot
Points
17
Breakout Trading with Pivot
Points
18
Breakout Trading with Pivot
Points
19
Placing Stop with Initial Breakout
20
Placing Stop with Initial Breakout
21
Placing Stop with Initial Breakout
22
Breakout Trading with Pivot
Points
23
Breakout Trading with Pivot
Points
BUY
BUY
24
Breakout Trading with Pivot
Points
25
Breakout Trading with Pivot
Points
26
Placing Stop with Correction
27
Placing Stop with Correction
SHORT SELL ??
28
Placing Stop with Correction
CORRECTION
29
Trend Trading with Pivot Points
DP
R
1
R2
S
1
S
2
Prices opened above DP &
stayed above it the whole day.
30
Trend Trading with Pivot Points
Prices opened below DP
& S1, signifying bearish
sentiment.
31
Trend Trading with Pivot Points
32
High Probabilistic Setup using
Candlestick Pattern & Pivot Point
BUY HERE & PLACE
STOP BELOW DOJI.
33
High Probabilistic Setup using
Candlestick Pattern & Pivot Point
34
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.
35
Reference
Book : "Candlestick and Pivot Point
Trading Triggers" by John Person
36
That's it !
Questions?
Suggestions!
37

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How to Use Pivot Points in Day Trading