Pivots 31 Floor Pivots

Floor Pivots

Traders believe the market direction can be divulged by Floor Pivot levels. They buy or sell these pivot levels and exit at either the first or second resistance levels. They also have the option to sell the pivot level and cover at the first or second support levels. Floor pivot trading is an effective way to find support and resistance levels, and is widely used by many traders. Prices around pivot levels signal choppy or trend market modes. In bullish markets, when prices consolidate around the pivot levels, prices tend to pick the prior trend direction and trade higher. Pivot trading is very crucial and most traders utilize daily Pivots for trading. However, weekly and monthly Pivots are equally important. Some traders compute the mid points between the Pivot and support or resistance levels and plot them on their charts.

A confluence of pivots increases the chance of potential support/resistance compared to a single pivot level. Often there will be many confluences between daily and weekly pivots on a chart and these levels could be significant for traders.

It is almost rare to see price reaching beyond R3, R4 or S3 and S4 levels on regular daily trading. Also, it may be rare to see prices outside of weekly S2 and R2 levels. Some traders use weekly extreme levels and short weekly "R2" level and cover at the weekly Pivot or buy the weekly "S2" level and sell at weekly Pivot levels.

Pivots are very efficient for both day and swing trading. Pivot trading is quite profitable using these support/resistance levels in the direction of the trend along with good money management techniques.

Floor Pivot Calculations

Pivot Point (PP) = (H+L+C)/3 First resistance (Rl) = 2*PP -L First Support (SI) = 2*PP - H Second Resistance (R2) = PP + (Rl-Sl) Second Support (S2) = PP - (Rl-Sl) Third Resistance (R3) = Rl + (H - L) Third Support (S3) = SI - (H - L)

These equations above can be also appli weekly, monthly Pivot calculations.

ed to pHi:784.9 PPR1:784.1 pC:783.3

R1S1:781.9

PP:780.5

PPS1:778.2

S1:776.0

pLo:773.2

S1S2:772.4

■784.00 ; 782.00 ; -780.00; -778.00 ; -776.00 : 774.00

Trading Floor Pivots

Floor Pivots

R1:824.0

pHi:821.0

pC:820.8

PP:817.8

S1:814.5 pLo:811.5

S2:808.3

Source: TradeStation

822.00

820.00

818.00

816.00

814.00

812.00

808.00

806.00

Trading Floor Trader Pivots

The example above illustrates Pivot levels from the ER2 15m chart. On February 8th, the market traded in a narrow range around the Pivot level suggesting a contraction in the volatility. On the following day, ER2 opened above the previous close and traded near the previous day's high but could not hold on to this high prices. After the first hour, prices traded below the Pivot level at 817.8 suggesting a potential volatility/range expansion. ER2 continued to trade below the Pivot point, but above the key support level S1 until lunch time. At around 12:30p.m., ER2 broke through the key support level SI at 814.5. A "short" trade was entered below the SI level. The potential targets were the previous day's low at S2 levels. The volatility expansion was very strong as the market fell through S2 at 808.3 level suggesting a potential target S3 at 798. At around 2pm, the market stabilized at S3 level and attempted a rally back towards S2 level.

Trading Floor Pivots

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Trading Floor Pivots

The chart above shows Floor Pivots from the Cisco (CSCO) 5 minute chart. On May 8th, in anticipation of CSCO's earnings report, the company rallied above the pivot level. A trade setup was presented when CSCO traded above the weekly high, but below the second resistance at R2. CSCO prices traded above the previous day's high at 27.97 and Pivot at 27.85 to suggest a potential bullish trend. At around 2 pm, CSCO closed above R2 to present a low-risk day trading opportunity.

1. Enter a "long" trade 5 cents above resistance at R2.

2. Place a "stop" loss at the previous high (at $27.97).

3. Place a "target" at the third resistance R3 (at $28.27).

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