Pivot points, as mentioned before, are used by traders to determine when to enter or exit a market.

Cryptocurrency
Bitcoin and Crypto Market Watch Wednesday, November 30, 2022 - 18:07

In today’s article, we’re going to discuss another pretty famous technical indicator crypto traders use to formulate investment strategies- the pivot points. A pivot point is an indicator that shows the trend a market follows over a particular period of time.

<source: tradingsim.com>

These points are calculated based upon the highs, lows, and closing prices of previous trading sessions for particular cryptocurrencies. The pivot point is calculated as an average of the high, low, and closing prices of a crypto from the last day. Traders use the supports and resistances witnessed to come up with the most profitable entry and exit points for their trade.

On a particular day, if a crypto is trading over the pivot point calculated from the previous day, it is thought to be witnessing an uptrend. Of course, the opposite is similarly thought to express a bearish outlook. 

Now, let’s see how the pivot points for a crypto are calculated. The most used way to calculate the pivot point on the price chart for a particular day is called the ‘five-point system’. The five points mentioned here are the past day’s highest price, lowest price, closing price, along with two support levels and two resistance levels. The formula used for the same would be:

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

Support 1 (S1)= (Pivot Point * 2) - Previous High 

Support 2 (S2)= Pivot Point} - (Previous High - Previous Low)

Resistance 1 (R1)= (Pivot Point * 2) - Previous Low

Resistance 2 (R2)= Pivot Point + (Previous High - Previous Low)

In 24 hour markets like the crypto markets, pivot points are usually calculated at 4 pm EST, which is the New York closing time, or at 23:59 GMT. These points of time are treated as the close of a trading session. 

Pivot points are usually used on a daily basis by most traders, but you can actually determine the same on a weekly or monthly basis.  

The pivot point itself works as the primary support and resistance when the calculation is done. So, essentially we expect the biggest price moves to happen at this very price. The other support and resistance levels used are much less significant in the calculation, but they do still supply impactful price movements. Pivot points, as mentioned before, are used by traders to determine when to enter or exit a market.  

As always, do keep in mind that while pivot points are in general pretty precise predictors of price movements, sometimes they can still fail to have much impact on forming the right trading strategy. Hence, always use them combined with another trading indicator to stay safe.

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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.

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