Understanding Pivot Point Trading Indicators In NinjaTrader®
What Does A Pivot Point Indicate?
Pivot point trading indicators are technical analysis tools that are used to identify potential support and resistance levels in the market. They are based on the idea that prices tend to move in a certain pattern, and that the high and low prices of the previous period can be used to predict the direction of future price movements.
As a result, the pivot points indicator is popular among day traders and scalpers, as it can help identify key levels of support and resistance in the market and provide potential trade opportunities.
How Do You Use A Pivot Point Indicator?
Pivot point trading indicators are calculated using the high, low, and close prices of the previous trading period. There are several different formulas that can be used to calculate pivot point trading indicators. These include the standard pivot point formula and the Fibonacci pivot point formula.
The Standard pivot point formula is as follows:
Pivot point = (high + low + close) / 3
The pivot point is then used to calculate the other pivot points, such as the resistance levels (R1, R2, R3) and support levels (S1, S2, S3).
The Fibonacci pivot point formula is as follows:
The formula for Fibonacci pivot points is the same as the standard formula (high + low + close / 3), but with Fibonacci levels incorporated into the calculations (most traders use 38.2%, 61.8%, and 100% retracements), resulting in three support and three resistance levels.
How Do You Read Pivot Points In Intraday Trading?
If you want to know how to read pivot points indicators, follow these steps:
Add the pivot point trading indicators to your chart
In the NinjaTrader platform, go to the “Indicators” tab and select the pivot point indicator. You can then customize the settings, such as the calculation method and the time frame, and add the indicator to your chart.
Identify potential support and resistance levels
The pivot point trading indicators will display the pivot point and the other support and resistance levels on your chart. These levels can be used as key reference points for traders, as they may indicate the level of supply and demand in the market.
Three Tips On How To Use Pivot Point Indicators In NinjaTrader:
1. Use a Pivot Points indicator in combination with other technical indicators
Pivot point trading indicators can be useful tools on their own, but they can be even more powerful when used in combination with other technical indicators. For example, use pivot points along with trend indicators such as moving averages, to confirm the direction of the trend.
2. Look for price action around pivot points
Pivot points indicators can identify potential trade opportunities by looking for price action around the support and resistance levels. For example, if price bounces off a support level, it may be a good opportunity to enter a long position. Similarly, if price breaks through a resistance level, it may indicate a potential trend reversal.
3. Customize your pivot point trading indicators
NinjaTrader allows traders to customize the pivot point indicator to suit their trading style and goals. For example, setting timeframes for the pivot points, choosing the calculation method, and setting the color and style of lines. By customizing the pivot point indicator, traders can tailor it to their specific needs and preferences.
Pivot points can be the ‘make or break’ difference when confirming an entry or an exit. Traders can lean on these to save ticks on losing trades and let winners run just a bit longer.
By customizing the pivot points to match your trading strategy, you’ll be able to easily spot the high and low price patterns and nail those key levels of support and resistance.
The result? The best, highest probability trades you can find.
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