How To Use Pivot Point In Intraday Trading | Motilal Oswal
How To Use Pivot Point In Intraday Trading | Motilal Oswal

How To Use Pivot Point In Intraday Trading

Intraday Trading or Day trading refers to buying and selling of stocks on the same trading day. Stocks and shares prices keep fluctuating throughout the day. Therefore, traders try to gain profit from these fluctuations by buying and selling the stocks or shares the very same day. This kind of trading is always beneficial for both the experienced trader and beginner trader as the trends guide them properly. 

  • How to Use Pivot Point in Intraday Trading?

Intraday Trading needs constant attention towards the market indications and trends. There are many strategies to do Intraday Trading and one of the most useful strategies is the Pivot Point trading. With the strategy of the pivot point in intraday trading, the previous day's high, low, and the mean price of a stock or share is analyzed to find out the present trend of the market. 

If the average price after the calculation is above the pivot point then the stock market is referred to as bullish. And if the average price is less than the pivot point then the market is referred to as bearish. On the chart there are a total of seven levels of pivot points. The basic pivot point lies in the centre of the chart and there are three resistance levels (R1, R2, and R3 levels) on both above and below the general pivot point. This is the true pivot point meaning. 

  • How to Use Pivot Point Levels?

After knowing how to use pivot point in intraday trading, you must grasp the perfect time to buy shares or stocks. It is when the nature of the market is bearish. You should buy stock and shares based on the nature of the market, latest trends, after calculation, and not instinctively or randomly. Two concepts that involve Pivot Point levels are Pivot level Breakout and Pivot Point Bounce.

  • Pivot Point Bounce:

In pivot point trading, Pivot Point Bounce is among the best crucial strategies. If the cost of a given stock reaches the point of pivot and bounces back then it is the right time to buy the stock. Experts recommend you buy stocks when there is a bounce on the upward side of the chart. If there's a bounce downward then you should consider selling the stocks. 

  • Pivot Levels Breakout:

The Pivot Levels Breakout strategy depends completely on the pivot levels. Short trades are performed when the market is bullish. Whereas, long-term trades are performed when the market is bearish. The breakout mostly happens during the morning hours when the market is open. This method reduces the chances of loss. 

  • Pivot Point in Intraday Trading Formula:

There is one simple formula to calculate the average pivot point. It is

Pivot Point (PP) = (High+Low+Close)/3

Bottom Line:

Pivot Point is one of the most successful strategies to reduce the chances of loss and gain profit by selling and buying shares or stocks in Intraday Trading. If you're in the stock market as a trader, it is the best strategy to use. It determines when to buy and when to sell the stocks as it thoroughly depends on the calculation and analysis. 

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