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Thursday, January 3, 2008

Using Pivot Points for Targets

When calculating pivot points, the pivot point itself is the primary Support/resistance.This means the largest price movement is expected to occur at this price.The other support and resistance levels are less influential, but may still generate significant price movements.

To Calculate Pivots in MS Excel:.

Column, values to enter, formulas U have to enter

A = Company Name/date
B = Open
C = High
D = Low
E = LTP/close
*Volume is not required in calculation of pivots

F = Pivot Number = (High+Close +Low )/3 [u can also include "Open" Value also so it will be = (Open+High+Close+Low)/4],so formula is =(C2+D2+E2)/3

normal trading range
G= Resistance 1 = 2*Pivot number-Low,so formula is =(2*F2)-D2

H= Support 1 = 2*Pivot-High ,so formula is =(2*F2)-C2

for volatile trading range:
I= Resistance 2 = Pivot+(Resistance1-Support1),so formula is =F2+(G2-H2)

J= Support 2 = Pivot-(Resistance1-Support1),so formula is =F2-(G2-H2)

for extreme trading range:
K= Resistance 3 = High+2*(Pivot-Low),so formula is =C2+2*(F2-D2)

L= Support 3 = Low-2*(High-Pivot),so formula is =D2-2*(C2-F2)

Target for next trading day
M= Resistance 2,so formula = I1 (previous days Resistance2)

Support for next trading day
O= Support 1,so formula = J1 (previous days Support1)

Tips to use in Intraday-Trade:
for bulls:

if a stock goes above R1 then he can buy above the R1 with stoploss at S1
if a stock falls below S1 (and finds support there),then he can buy above the S1 with stoploss at S2

for bears:
if a stock falls below S1 then he can Short sell with stoploss at R1
if a stock goes above R1 (and finds Resistance there),then he can Short sell with stoploss at R2


Important
Pivot points enables trader to quickly calculate levels that are likely to cause price movement. Pivot points are short-term trend indicators, useful for one day only,then they need to be recalculated.The success of a pivot-point system, lies only with the trader,with his/her ability to effectively use the pivot-point systems with other forms of technical analysis.