Weekly Pivot Points

Weekly Pivot Points are a well-known trading method. It was originally used to calculate intraday support and resistance points by market makers and local pit traders. The approach has been around for decades and is still in use today due to its simplicity and efficiency.

What are Weekly Pivot Points?

Weekly pivot points are a type of technical analysis indicator used in financial markets to identify potential levels of support and resistance for the upcoming week. They are based on the previous week’s high, low, and closing price and are calculated using a simple formula.

The formula for calculating weekly pivot points is as follows: Pivot Point = (Previous Week’s High + Previous Week’s Low + Previous Week’s Close) / 3

The first level of support and resistance is then calculated as follows:

  • Support 1 = (2 x Pivot Point) – Previous Week’s High
  • Resistance 1 = (2 x Pivot Point) – Previous Week’s Low

Additional levels of support and resistance can be calculated by using the same formula but with different multiples of the pivot point.

Weekly pivot points are widely used by traders to identify potential levels of buying and selling activity. When the market is above the pivot point, it is considered to be in a bullish trend, and when it is below the pivot point, it is considered to be in a bearish trend. Traders will often use the support and resistance levels to determine potential entry and exit points for trades.

Using Weekly Pivot Points in Trading

Trading involves identifying potential areas of support and resistance based on the previous week’s high, low, and closing prices. These levels can be used to inform trading decisions and manage risk. When the price of an asset is trading above the weekly pivot point, it is considered to be in an uptrend, and the weekly pivot point becomes a potential area of support. Conversely, when the price is trading below the weekly pivot point, it is considered to be in a downtrend, and the weekly pivot point becomes a potential area of resistance. Traders can use these levels to set entry and exit points for their trades. For example, a trader may set a buy order at the weekly pivot point with a stop-loss order just below the level. Similarly, a trader may set a sell order at a level of resistance just above the weekly pivot point with a stop-loss order just above the level.

In addition to the weekly pivot point, traders may also use other levels, such as the first support and resistance levels, as additional areas of support and resistance. These levels are calculated based on the weekly pivot point and the range of the previous week’s high, low, and closing prices. It is important to note that while weekly pivot points can be a useful tool in trading, they should not be used in isolation. It is important to consider other technical indicators, market sentiment, and economic news to make informed trading decisions.

Weekly Pivot Points Example
Weekly Pivot Points Example

Weekly Pivot Point Trading Strategies

Weekly pivot point trading strategies are a popular way for traders to identify potential support and resistance levels for the upcoming week. Pivot points are calculated using the previous week’s high, low, and close prices, and they can be used to identify potential areas where price may reverse or consolidate. Here are some common weekly pivot point trading strategies:

  1. Pivot Point Breakout Strategy: This strategy involves looking for a breakout above or below the weekly pivot point. If the price breaks above the pivot point, traders may interpret this as a bullish signal and look to buy. Conversely, if the price breaks below the pivot point, traders may interpret this as a bearish signal and look to sell.
  2. Pivot Point Reversal Strategy: This strategy involves looking for price to reach the weekly pivot point and then reverse direction. If price reaches the pivot point and then starts to move higher, traders may interpret this as a bullish signal and look to buy. Conversely, if price reaches the pivot point and then starts to move lower, traders may interpret this as a bearish signal and look to sell.
  3. Pivot Point Bounce Strategy: This strategy involves looking for price to bounce off the weekly pivot point. If price reaches the pivot point and then bounces higher, traders may interpret this as a bullish signal and look to buy. Conversely, if price reaches the pivot point and then bounces lower, traders may interpret this as a bearish signal and look to sell.

Weekly Pivot Points Pros & Cons

Pros

  • Weekly pivot points can provide traders with key support and resistance levels for the upcoming week.
  • Weekly pivot points are relatively easy to calculate, requiring only the previous week’s high, low, and close prices. This makes them accessible to traders who may not have advanced technical analysis skills.

Cons

  • Weekly pivot points may not be as effective in fast-moving markets, as the levels can quickly become outdated.
  • Weekly pivot points may not work as well in all markets, as different markets can have different levels of volatility and liquidity.

Conclusion

It’s important to note that pivot points are just one tool in a trader’s arsenal and should be used in conjunction with other technical analysis tools and risk management strategies. Traders should also keep an eye on economic events and news that may impact the market.

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