INTRODUCTION

Hi everyone, The lecture by @stream4u on the pivot point indicators was very detailed and enlightening. I learned a lot from it, and a large percentage of my idea of the indicator is influenced by the lecture.

The Professor taught on how to apply the indicators properly, and how to set them, which I was finding hard to go around formerly. So this is my homework submission on the tasks the professor gave at the end of the lecture.

QUESTION 1

Discuss your understanding of Pivot Points. (Title For this topic will be Pivot Points)

Pivot Points

The pivot point is an indicator with so many lines indicating different points, that is generally used to analyze the trend on a chart correctly. The pivot point indicator is useful when used on different timeframes on the chart. The lines on the pivot points indicator are actually derived from the average values of the past Day's and the current Day's highs and lows, and also considering the opening and closing prices from the previous days.

Using the pivot point indicator, a trader has a sort of summarizer of the previous activities in the market of that pair, and can act accordingly with his assessment, as trading above the pivot point indicates bullish sentiment and vice versa.

The Pivot points are designed in a way, that data of price changes due to sentiments are put into consideration, and can help the trader/investor know if she should enter or exit at a point. It also shows the points that the market might change trends. The indicator is made of so many lines, which helps to clear out what the actual trend is.

How the Pivot point Indicator looks, screenshot is taken from trading view

As seen above, the indicator spreads back to a reasonable amount of days back, that is where the indicator brings up a summary of the price ranges, closing prices and so on of former days and even months.

Another reason why i see this indicator as unique is the fact that the lines give the trader an idea of where to place the take profit and stop loss, and also show good entry and exit points with the use of so many lines. It looks so much like the Fibonacci Retracement Indicator which is another useful indicator.

QUESTION 2

Details about Pivot Point Levels.

Having explained How the pivot points indicator can be useful to the trader, it is useful to know the levels, and how the indicator came up with the price point at which it keeps each level.

As I've noted before, the indicator in question assesses the important price points of previous trends, the prices at where the market trend changed either to the bull or to the bear direction.

The Levels that are to be discussed are the seven in total, The first three R points, the first three S points, and the Main or middle pivot point. so in essence, we are discussing the R1-3, S1-3, and then the Main pivot point.

• THE MAIN PIVOT POINT:
  The main pivot point is the middle man, it is a mean of three price values which are the closing price for the day, the highest price of the day before, and the lowest price of the day before. This is based on the previous day because the new indicator appears early in the day.

• RESISTANCE POINT 1(R1):
  This is the price level directly above the main pivot point, where the trend reaches at first after bouncing of the main or middle line. It symbolizes the level where price will likely face resistance first.

• RESISTANCE POINT 2(R2):
  The resistance point 2 is the level just above R1, It is there to serve as the second probable resistance level, where price might hit and look down back for support, that is after breaking the Resistance 1 level of course.

• RESISTANCE POINT 3(R3):
  This is the third point or level of resistance, to note that the space between R1 and R2 and the space between R2 and R3 vary because the data used to determine them is not a constant. The R3 represents another point of resistance for the price which is now definitely looking like it is on a bullish trend.

• SUPPORT POINT 1(S1):
  This is the level just below the main or middle point on the indicator. It is the point that speculates the first level of support of a price that looks like it is heading towards a downtrend.

• SUPPORT POINT 2(S2):
  The S2 is the second estimated support price taken from price analysis from previous price readings. it shows a region where price might revers a trend or bounce back up in search of resistance.

• SUPPORT POINT 3(S3):
  This level is the line that stands as the third probable point that price could reverse or bounce off into a new trend. The price must have passed down the S2 before one should consider reading the chart with the S3 line.

QUESTION 3

Pivot Point Calculation and R1 R2 S1 S2 Pivot Levels Calculation.

• PIVOT POINT CALCULATION:

The formula to calculate the Pivot Point (PP) is: The closing price of the previous day + The highest price of the previous day+ The lowest price of the previous day divided by 3

In other words, we are finding the mean of these three prices. In an instance where the closing price of the previous day was at $300, and the highest price is at $500, but it's lowest was at $100 the calculation would look like this:

PP=$500+$300+$100/ 3
PP= 900$/3
PP= $300

• R1 CALCULATION:

PP * 2 - lowet price of the previous day
the calcuation would look like this:
R1=$300 * 2-$100
R1=$600-$100
R1=$500

• R2 CALCULATION:
  R2= PP+ (Highest price of previous day-lowestprice of previous day)
  The calcuation for R2 would look like this:
  R2= $300 + ($500-$100)
  R2= $300+ $400
  R2=$700

• S1 CALCULATION:

PP * 2 - Highest price of the previous day
the calcuation would look like this:
R1=$300 * 2-$500
R1=$600-$500
R1=$100

• S2 CALCULATION:

R2= PP - (Highest price of previous day-lowestprice of previous day)
The calcuation for R2 would look like this:
R2= $300 - ($500-$100)
R2= $300 - $400
R2=$-100

QUESTION 4

How to Apply Pivot Point on Chart. (Screenshot with tag your name)

• Step1:
  Open A chart on any site preferrable to you, for this task, i'm using trading view
• Step 2:
  At the top of the chart, there is a box there that says "indicators", select it and search for Pivot Point (standard)
  
  
  
  The indicator button up there
  
  
  
  I selected the pivot point (standard) and the Indicator was deployed as seen below:

The white Box showing the most recent Pivot points on the chart.
As professor @stream4u taught in the lecture, we could also customize the indicator to look like our preferred fashion, like the change in color, and size of the indicator.



From the above picture, it shows where i located the indicator settings at the far top right of the chart, and when i clicked on it, it led to a dialogue box below.



The Dialogue box above shows how you can customize the indicator to suit you and your personal parameters, i explored more and clicked on "styles" and it led to the box below.

This box was the setting to customize the look and color of the indicator;

After customizing the colors to my taste, here is how the Pivot Point indicator looked like;

QUESTION 5

How Pivot Points Work. (Screenshot with tag your name)

The pivot point indicator Has several lines that indicate support and resistance levels. Now when the Price action reacts in certain ways to these levels, The next price action or trend can be predicted.

One thing to always keep in mind when analyzing a chart using the Pivot Point indicator is that The movement of the trend is predicted from how the price reacts from the "P" line, or on The pivot point.

Another thing you might want to keep in mind is that the price sometimes bounces under the lines of support and resistance provided by the indicator.

The trend when going down may be able to hit it's lowest and closing price for that day anywhere below the S2 line, as we could confirm that from that line downwards, the bearish trend is here to stay for a while.

Notice the price action of BTC in the 4 hours Time-frame within the indicator, and Notice what all the arrows are pointing to. From The chart above, we can see how the downtrend commenced at the Pivot Point(P) and went down till it hit it's closing price for that day, and the lowest price for that day at S5!

Also notice how price periodically bounces off the support lines as it continues on it's downtrend, It mostly bounces on S2 more frequently, which might indicate a more frequent support and a slow reverse in trend brewing.

One could also notice, that former Support levels are also now acting as the new resistance. That is why this indicator is so useful, It gives the trader a range to look at, automatically analyzing the chart for the most part.

QUESTION 6

Pivot Point Reverse Trading. (Screenshot with tag your name)

Using two trading strategies or indicators can be really effective, here is the XRPUSDT chart, and below, i spot a reversal and a morning star coinciding with Resistance and support lines on the Pivot point indicator, and whenever the two indicators collided, there was always a reversal in trend, see below:

QUESTION 7

What could be common Mistakes in Trading with Pivot Points

• No indicator is perfect or always right, some traders might forget this and stand strictly by placing trades too early or too late.

• Sometimes the support and resistance levels are misleading, some traders might stick to the reading of the indicator too much and get caught out in long dip and reversals.

QUESTION 8

What could be the reasons For Pivot Points is Good.(Pros/Advantages)

• Saves time for analysis, as it has brought out lines of highly probable support and resistance based on the former behavior of the market and price action.

• It helps to give a trader the correct view of how a price could jump on a very familiar price.

QUESTION 9

Apply the Pivot Points indicator in the Today chart (the day when you making this task) and set the chart for 15 minutes. Explain the market trend till the time of writing the task and how it will be next till the end of the day. You can give possibilities on both the side bearish and bullish.

i am using the XRP/USDT pair to do this task, and i'm analysing an uptrend due to the reversals i have spotted and the bounces on the levels of the pivot point indicator.