Pivot Point Intraday Trading System
Tags: intraday, trading, system, fmzquant
Published: 2024-05-20 02:21:09

Pivot Point is an intraday trading method, which is very simple and practical. It is a very "simple" resistance support system. It is a method invented by an expert in futures about 10 years ago. It has been widely used in digital currency, stocks, futures, treasury bonds, indexes and other high-volume commodities. The classic Pivot Point is a seven-point system, which is composed of seven prices. At present, the widely used 13-point system is actually the same, but with 6 additional prices, which are used for high-volume commodities. The following is the formula:
```
pivot:= (high + low + close) / 3; (highest, lowest and closing of the previous day)
r1:= 2*pivot - low;s1:= 2*pivot - high;r2:= pivot + (r1-s1);
s2:= pivot - (r1-s1);
r3:= high - (2 * (low - pivot));
s3:= low - (2 * (high - pivot));
sm1:=(pivot+s1)/2;
sm2:=(s1+s2)/2;
sm3:=(s2+s3)/2;
rm1:=(pivot+r1)/2;
rm2:=(r1+r2)/2;
rm3:=(r2+r3)/2;
```
The pivot is the so-called axis, which is the center of the resistance system. Other r/s are resistance and support, and m is the central price of the two resistances. If you don't understand, you can use EXCEL to make a table and mark the price on it. Although this system is simple, it has been developed by foreigners.

- Pivot has an attractive effect. In the absence of large long or short positions, the price moves around the axis between r1 and s1, but the movement may be irregular. Someone specializes in trading within this range, called floor trader.

- Driven by strong bulls or bears, the price will break out of the s1-r1 area, and then there will be a trend, but it is still within the normal range of price movement. In this range, there will be a strong sense of direction, and most of the time is close to r1, r2, or s1, s2 price movement, and the middle area stays for a short time.

- R3 and s3 are extreme prices that will not arrive without special unfavourable information or favourable information. This price is of great significance. It is often (not necessarily) accompanied by special circumstances, such as the v-shaped reversal of a single top, which is an opportunity to run a sprint into a marathon. Generally, it is an opportunity that day traders cannot miss.

- Other prices with m have a stabilizing effect, but it is of little significance to make a reference for admission.

Although this system is calculated according to the special price, it does not mean to be used mechanically. The construction of this system is based on the classification of various roles in the market.

Number does not mean anything, price movement does.

If the price moves in the area of r1-s1 during the whole trading day, who do you think is the trader in this market? Is it a long-term investor? Is it the main force? Certainly not. It's those short-term traders, including individual investors, small funds, etc.

When you get to the r2-s2 area, big speculators appear, and big funds begin to take action. Note that this time is in the "market", perhaps the beginning of a market, or the continuation of the market. What you need to do in this stage is to find a good position to enter the market and follow the trend. But the problem arises. After arriving in this area, usually the good admission price has passed. What should we do? I don't know. The market can only be solved when you are in it. The market is changing, and the only thing you and I can do is to "change".

R3-s3, strong trend. They are called extreme prices, which means they can only happen under extreme circumstances. At this time, the participants are far from a few funds, or a few investors can do it, perhaps the central bank, perhaps Soros, but no matter who, the fact behind is too difficult to say, and the use of technical analysis tools will not work at all. At that time, it's best to avoid it. If you have courage, just follow your feelings.

We all trade in the market and buy and sell every day. But have you ever wondered who your opponent is? Who sold it to you, what was he doing when you made profits, and what was he doing when you lost money?

The market is a bully. It always follows the side with more money, so we must keep up with the "fat cat" if we want to keep up with the market. In this sense, the market is not a casino, but a battlefield. It is a real battle. If you choose the same investor as you as your opponent, you may win; What will happen if you choose the "fat cat" to promote the market? You will know after paying the tuition fee.

From: https://blog.mathquant.com/2023/01/20/pivot-point-intraday-trading-system.html