In every time frame, there's a pivot system for a stock: pivot, resistance, and support. There are a lot of ways to calculate pivot points, but in a nutshell, pivot is the average of the stock's
high, low, and closing prices for the time frame; support is where to buy the stock; and resistance is where to sell it.
Using pivot in our trading sounds simple at first. For instance, if the stock closes above the pivot, it's bullish. If it closes below the pivot, it's bearish. And if it closes on pivot, it's neutral.
But what about risk/reward? Where do you set your stop-loss? How do you know if you're in a good trade?
That's where the Trending123 Pivot Calculator comes in. All you have to do is plug in the stock's ticker, and it automatically fills in the low, high, close, and open and calculates the support
and resistance for four types of pivotsfloor trader pivots, Woodie's pivots, Camarilla pivots, and DeMark pivots (you can read the descriptions of each under the pivot table for how to use them).
If you want to use the pivots to day-trade, click on the "Calculate Risk/Reward" button directly under the pivot table. This will show you where to buy on the pivot, where to take profits,
where your stop-loss should be, and so on. If your stop-loss is at 5%, and your profit potential is at 2%, that's what I call a negative risk/reward, since you stand to lose more than you could gain.
If your stop-loss is at 2%, and your profit potential is at 5%, that's what I call a positive risk/reward.
You can use the pivot calculator to find out what stocks are great buying opportunities, very risky, or just plain neutral. For example:
- If the profit potential is much greater than the stop loss, it might be a good buy.
- If the stop loss is much greater than the profit potential, you should probably stay away.
- If they're about the same, it's probably not worth trading.
The Trending123 Pivot Calculator doesn't give you guaranteed profits (nothing does), but it can be a very useful tool in assessing the risk and reward of the stocks you're interested in. After all,
unless the reward is greater than the risk, why would you want to trade them?
Floor trader pivots come from the pit traders. A lot of people use them so they are almost self fulfilling. The main pivot point is usually used as the primary trend indicator. If price is
above the primary go long and if below go short. The others act as normal support and resistance levels. Generally price will not penetrate S/R 3 if it does it will probably be a big move. You can use
these for daily, weekly and monthly.
Camarilla pivots show probable levels of support and resistance in a current trend. It's kind of hard to find information on these and I don't use them much. R3/S3 are the major levels where
you can expect a reversal. R4/S4 are the breakout levels. If price trades above those levels it's a good bet price is going to continue in that direction. They seem to work pretty well though on the
daily charts.
DeMark pivots aren't really pivots. They were invented by a guy named Tom DeMark and attempt to identify the high and low points for the period. They need the current open price to determine
which formula to use in the calculation. Mostly good for Daily.
Woodie's pivots are pretty much like the floor trader pivots but the formula gives more weight to the closing of the previous day. These are good to use on days where there is a large gap up
or down. When I use them I tend to use both woodie and the floor trader pivots until I can determine which ones are going to give me the better signals. Risk
Calculator
