Trading Bitcoin Using Pivots

Pivot Points is a set of indicators that were developed by floor traders trading the commodities markets so as to help them identify the potential market reversal points. These market turning points were known as pivots. These pivot points are calculated so as to figure out the levels at which the market sentiment of the current market trend could change from bullish to bearish or vice versa.

Bitcoin traders use these points as markers of support and resistance levels.

These pivot points are calculated as the average of the high, low and close from the previous session:

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

Day traders use the calculated pivot point levels to figure out levels of entry, levels of setting stop losses and levels of setting take profit for their Bitcoin trades. The Pivot points try to figure out where the majority of the traders are setting their orders at the same time - when all of the Bitcoin traders are doing the same thing.

In analysis, a pivot point level is a significant financial trading market indicator that is used by currency traders to predict the price movement. This btcusd indicator is calculated as an average of the significant prices (high, low and close) from the performance of market prices in the previous period.

Bullish Sentiment - If the prices in the following period trade above the center pivot point: this is evaluated as a bullish sentimentBearish Sentiment - If the prices in the following period trade below the central pivot point: this is evaluated as a bearish sentiment

The central pivot point is also used to calculate additional levels of support & resistance, below and above this central pivot point, respectively - by either adding or subtracting the price differentials calculated using the previous trading data.

A Pivot & the associated support & resistance areas are often turning points for the direction of the market price movement.

In an upward trend - price stays above the pivot point, the resistance areas may represent a ceiling level for the market price and if prices go above these technical levels then the up trend is no longer sustainable and a retracement may occur.

In a downwards trend - price stays below the pivot point, the support levels might represent a floor level for the market price & if prices go below these technical levels then the downtrend is no longer sustainable and a rally (pull back) may occur.

The Central Pivot Point is used to calculate the support & resistance areas as follows:

Pivot points consist of a central point level surrounded by 3 support levels below and 3 resistance areas above it. These pivot points were originally used by floor traders trading equities and futures exchange markets mainly because they provided a quick way for the online traders to get a general idea of how the market was moving during the course of the day using a few calculations. Over time, these pivot points also proved to be exceptionally useful in other trading markets as well.

One reason why these pivot points are now so popular is because they are considered to be a 'leading' (or predictive) technical indicator rather than a lagging technical indicator.

All that is needed to calculate the pivot points for the upcoming (current) day is the previous day high, low, & closing prices. The 24-hour cycle pivot points in this technical indicator are calculated in accordance to the following formulas:

The central pivot point then can be used to calculate the 3 support and 3 resistance levels as follows:

Resistance 3 Resistance 2 Resistance 1Pivot PointSupport 1 Support 2 Support 3

The Pivot Points is illustrated below:

Trading Bitcoin Using Pivot Points Bitcoin Indicator - BTCUSD CryptoCurrency Pivot Point Indicator

Bitcoin Using Pivot Points

Pivot Points Analysis

The central pivot point level itself represents a level of the highest resistance/support depending on the overall market sentiment. If the market is range bound and directionless then price will often fluctuate greatly around this level until a price breakout develops.

Prices above or below the central pivot point shows the overall sentiment as bullish and bearish respectively. Pivot Point indicator is a leading technical indicator that provides market signals of potentially new highs or lows within a given chart time=frame.

The support & resistance areas are used as exit points - e.g., if the price is trending upwards & prices are above the central pivot, then Bitcoin prices continue to move up to the first and then the second resistance level - then Bitcoin traders can use this second resistance level as a good place to close-out their buy trade position, as the probability of resistance & reversal increases greatly with every resistance area.

In pivot point analysis there are 3 levels commonly recognized above & below the center pivot point. These levels are calculated from the range of the price movement in the previous trading Bitcoin price period and then added to the central pivot for resistance areas and subtracted from the central pivot for support levels.

Pivot Points trading analysis is used in 3 ways:

BTCUSD Trend Direction: Central pivot point is useful when determining the general trend of BTCUSD prices. Trades are only opened in direction of the market trend. Buy trades are opened when price of Bitcoin is above the center pivot point & sell trades are opened when the price of Bitcoin is below the central pivot point.

Price Breakout: In a price breakout a bullish signal is when prices break upwards through the central pivot point or one of the resistance levels (commonly Resistance Level 1). A sell signal is when price breaks-out down-ward through the central pivot point or one of the support levels (often Support Zone 1).

Trend Reversals: In trend reversal, a buy signal occurs when price moves towards a support zone, often Support 2 or Support 3, and the price of Bitcoin touches the support zone or only moves a little through it & then reverses and starts moving in the other direction.

A sell trading signal occurs when price moves towards a resistance area, often Resistance 2 or Resistance 3, and the price of Bitcoin Crypto Currency touches the resistance level or only moves a little through it & then reverses and starts moving in the other direction.

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