Pivot Point

Discussion in 'Index Futures' started by brich, Jun 27, 2002.

  1. brich


    Hello folks,

    I want to know regarding Pivot point, some one can explain about how does it interpret and calculate.
  2. josbarr


    We email these numbers free on a daily basis. jbarry@proedgeonline.com

    Pivot point (P) = (H + L + C) / 3
    First resistance level (R1) = (2 * P) - L
    First support level (S1) = (2 * P) - H
    Second resistance level (R2) = P + (R1 - S1)
    Second support level (S2) = P - (R1 - S1)

    where H, L, C are the previous day's high, low and close,

    As long as no significant market news has occurred between yesterday's close and today's opening, locals tend to move the market between the pivot point and the first band of support and resistance. As with traditional technical analysis, should these levels fail then the second levels will come into play. If this next support and resistance band fails then a new influx of players will come in and likely start a trend in motion.
  3. does this work?
  4. Surprisingly well, once you get the feel of it. There are different approaches to using them though. It's a traditional tool of locals in the pit. RT will display the pivots and it works quite well on stocks.
  5. josbarr



    Joe Barry
  6. The pivot points worked real well Thursday on SP futures, kept bouncing off the pivot point before finally going through.
  7. Pit traders used them a long time ago. But most have replaced them for more sophisticated computer analysis of support/resistance.

    They still seem to work sometimes - probably because there's a new crop of retail traders who've "discovered" the idea. I compared the old pivots with more advanced methods and the pivots can be off by multiple points (usually when it's most important) too often for my taste.

    Thursday on the S&P futures is a good example. Pivot was shown as 966.83. But the software I use showed support at 963.49. The intraday bottom ended up being 964.

    Maybe not for everybody, but for me 3 points on the ES is significant.
  8. k. guess I'll have to take some time to write a little formula for it somewhere....

    thanks all.
  9. Everyone knows where the pivots are, also anyone can come up with any number of different pivots based on different methods of calculation. Now if someone could just explain how to *consistently* trade off these "pivots", that'd get a few thank-yous here, I bet.:p
  10. sunny - methodology of trading off any form of support/resistance is the same regardless of how you use derive it and a number of books discuss support/resistance trading.
    #10     Jun 28, 2002