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Pivot Points Helping to Define Market Trends [ ru ]



Introduction

Pivot point is a line on the price chart that shows the further trend of a currency pair. If the price is above this line, it tends to grow. If the price is below this line, accordingly, it tends to fall. In this article, we are going to list the main principles of pivot point construction, and also we’ll try to understand the essence of this concept.


Pivot Calculation Using the Last Day Values

The majority of indicators function similarly: it counts pivot point on the base of the last day values or on the base of arbitrary time range. Let’s consider several examples:


Classical PIVOT calculation:

//---- 
i = 1;
while(TimeDay(Time[_shift + i]) == prevDay) 
    i++;
// The indicator is developed for history, therefore we 
//calculate successively for all days
i--;
FH = High[Highest(NULL, 0, MODE_HIGH, i, _shift + 1)];
FL = Low[Lowest(NULL, 0, MODE_LOW, i, _shift + 1)];
// We take maximal and minimal figures
if(Formula == 0) 
    FP = NormalizeDouble((FH + FL + Close[_shift+1]) / 3.0, Digits); 
else 
    FP = NormalizeDouble((FH + FL + 2*Close[_shift+1]) / 4.0, Digits);
// Direct pivot calculation (only creator’s imagination plays an important role here).
// In this case the sum of maximum, minimum and closing price 
// is divided by three. It is so-called “classical” pivot //calculation
ResBuffer[_shift] = NormalizeDouble(FP + (FH - FL), Digits);
SupBuffer[_shift] = NormalizeDouble(FP - (FH - FL), Digits);
//----

Ninety percent of indicators calculate the pivot point in such a way.

Analytical PIVOT

Usually supporters of the pivot point theory get it not from calculations but from Dow-Jones Newswires. The current-day PIVOT is given by Rudolf Axel. Here is an example of his intraday analyses:

TECHNICAL EXPERTISE of the EUROPEAN CURRENCY MARKETS: EUR/GBP has reached the highest mark for eight and a half years -2-
/With continuation /

Dow Jones Newswires Column, the author is Rudolph Axel
London, February, 9. /Dow Jones/. Flexi time for twenty-four hours
Spot quotations: EUR/USD; USD/JPY; GBP/USD; USD/CHF
Spot on 07.35 Greenwich mean time 1.3016 121.45 1.9515 1.2486
Three-day trend The bounce from a support level The bounce from a support level Downwards The bounce from a support level
The week trend bounce from a support level The growth is limited by a resistance level The sideways Upwards
Flexible comparison of 200 days: 1.2829 116.78 1.8977 1.2352
3rd resistance 1.3117 122.20 1.9748 1.2544
2nd resistance 1.3074 121.75 1.9668 1.2519
1st resistance 1.3045 121.47 1.9623 1.2500
Pivot point* 1.3026 121.33 1.9546 1.2478
1st support 1.3000 121.00 1.9549 1.2450
2nd support 1.2951 120.82 1.9514 1.2425
3rd support 1.2913 120.64 1.9483 1.2380
Spot quotations:
Spot quotations: Pair euro/British pound; Pair euro/Japanese yen; Pair euro/Swiss franc; Pair the Australian dollar/dollar of the USA
Spot on 07.35 Greenwich mean time 0.6668 158.07 1.6252 0.7798
Three-day trend Upwards; Upwards; Upwards A bounce from a support level
The week trend bounce from a support level? Upwards Upwards bounce from a support level
Flexible comparison of 200 days: 0.6764 149.80 1.5842 0.7639
3rd resistance 0.6693 159.02 1.6312 0.7872
2nd resistance 0.6672 158.88 1.6298 0.7839
1st resistance 0.6661 158.62 1.6275 0.7820
Pivot point * 0.6664 158.10 1.6257 0.7806
1st support 0.6643 158.15 1.6245 0.7787
2nd support 0.6625 157.81 1.6219 0.7765
3rd support 0.6614 157.25 1.6184 0.7750
/Continuation/

Intraday EUR/USD: the pair has bounced sideways to the minor resistance on 1,3045/day maximum of the Friday/. If this level is pierced, the pair can check up on durability a resistance on 1,3074/maximum of February/. Minor support is located nearby psychologically important zone at 1,30.
Week EUR/USD: a bounce from a level of support.
Intraday USD/ JPY: the pair grows aside a minor level of the resistance 121,47/minimum of January, 30th/, and then of the resistance 121,75/maximum of January, 31th/. The minor support is located in the zone of 121,00, and then - at the level of 120,82/maximum of Wednesday/.

Week USD/ JPY: The growth is limited by a resistance level.

Intraday GBP/USD: the pair swings above the minor support on 1,9549/minimum of January, 29th /after sharp falling on Thursday. If the pair falls below this level, it’ll take aim at support on 1,9514/level of Fibonacci correction on 61,8 % of January growth wave/. The minor resistance is located nearby 1,9623/minimum of February, 1st/.

Week GBP/USD: the lateral range.

Intraday USD/CHF: the pair is aimed at area of resistance about a mark of 1,25. If this resistance is pierced, the pair will be aimed at 1,2519/maximum of February, 5th/. The minor support is located nearby 1,2450, hardly below a day minimum of Friday. The following support is located nearby 1,2425/maximum of Wednesday /.
Week USD/CHF: the bullish trend.

Intraday EUR/GBP: the pair confidently grows again and it is aimed at the minor resistance on 0,6661/maximum of Thursday/. If the pair pierce this level, it’ll be aimed at the mark of 0,6672, and then - of 0,6693. The minor support is located nearby 0,6643/maximum on the end of January/.

Week EUR/GBP: a bounce from a level of support?

Intraday EUR/JPY: the pair is growing aside a historical maximum 158,62. If this level is pierced, the pair will be aimed at the minor resistance on 158,88. The minor support is located nearby 158,15/maximum of January, 30th/, and also on 157, 81.

Week EUR/JPY: the bullish trend.
Intraday EUR/CHF: the pair is aimed at the minor resistance on 1,6275/day maximum of Friday/. Last time this level has been fixed in August, 1998. If this level is pierced, the pair will be aimed at the level of resistance 1,6298. The minor support is located nearby 1,6245/maximum of January, 29th/. The following minor support is located nearby 1,6219/maximum of February, 1st /and 1,6184/maximum of Monday/.
Week EUR/CHF: the bullish trend.
Intraday AUD/USD: the pair is aimed at the minor resistance of 0,7820/day maximum of Friday/. If this level is pierced, the pair will be aimed at the resistance of 0,7839/level of Fibonacci correction on 50 % of a January wave of falling/. The minor support is located nearby 0,7787/maximum of Wednesday/and 0,7765/day minimum of Thursday/.

Week AUD/USD: the growth is limited by the level of resistance.
*Pivot point is equal to the sum of a maximum, a minimum and price divided by three.

/The end/

Dow Jones Newswires, PRIME-TASS


The central part of the forecast contains the so-called "Axel levels":


EUR/USD

USD/JPY

GBP/USD

USD/CHF

3rd resistance

1.3117

122.2000

1.9748

1.2544

2nd resistance

1.3074

121.7500

1.9668

1.2519

1st resistance

1.3045

121.4700

1.9623

1.2500

Pivot point*

1.3026

121.3300

1.9546

1.2478

1st support

1.3000

121.0000

1.9549

1.2450

2nd support

1.2951

120.8200

1.9514

1.2425

3rd support

1.2913

120.6400

1.9483

1.2380


EUR/GBP

EUR /JPY

EUR /CHF

AUD/USD

3rd support

0.6693

159.0200

1.6312

0.7872

2nd resistance

0.6672

158.8800

1.6298

0.7839

1st resistance

0.6661

158.6200

1.6275

0.7820

Pivot point*

0.6664

158.1000

1.6257

0.7806

1st support

0.6643

158.1500

1.6245

0.7787

2nd support

0.6625

157.8100

1.6219

0.7765

3rd support

614

157.2500

1.6184

0.7750


As you see, it is possible to take from the given analyses not only pivot points, but also the basic lines of support/resistance. For those who would not like to allocate levels from a newswire by him or herself, there is a special section on a website http://www.forum.profiforex.ru/showthread.php?t=480 where the script containing levels is placed daily. After you receive the analytical information, it is necessary just to reflect it in the price chart quickly and in "workmanlike manner". As for me, I prefer to use scripts for this purpose. The scripts stop working after Axel lines have once been drawn.

Line Drawing

After we have calculated (or taken from analytics) the pivot point, it is necessary to display it in the charle of MetaTrader 4 Client Terminal. Let’s consider tools that allowus to draw lines in the chart automatically. First of all, it is necessary to create object "Line". It should be done in the following way: first it is necessary to define the line direction. Let’s suggest that it begins on the 13rd of February at 00:00 and runs out in the end of the same day. The level is determined by variable "Pivot".


ObjectCreate("PivotDJ", OBJ_TREND, 0, D'2007.02.13 00:00', Pivot,
D'2007.02.13 23:59', Pivot);
// Object title, type (in this case it is “a trend line”)and 
//data about the beginning and the end of the line
// Next it’s necessary to define the main properties of the 
//line:
ObjectSet("PivotDJ",OBJPROP_COLOR, colorPivot);
// A color
ObjectSet("PivotDJ", OBJPROP_WIDTH, 0);
// A thickness
ObjectSet("PivotDJ", OBJPROP_STYLE, 0);
// A style
ObjectSet("PivotDJ", OBJPROP_RAY, 0);
// It is necessary to draw a ray not the line. (it should not 
//come for other days)
ObjectSet("PivotDJ", OBJPROP_STYLE, STYLE_DASH);
// A type of the line

To draw all Axel lines, it is necessary to create a line for each level. Here is the complete code:

// First of all, let's define the levels (we take levels for GBP for one of 
// days)
// if(Symbol() == "GBPUSD")
//   { 
//     R3 = 1.9591;
//     R2 = 1.9543;
//     R1 = 1.9514;
//     P = 1.9487;
//     S1 = 1.9441;
//     S2 = 1.9405;
//     S3 = 1.9373 ;
//   }
// Drawing the Pivot Line:
 ObjectCreate("PivotDJ", OBJ_TREND, 0, D'2007.02.13 00:00', P, 
              D'2007.02.13 23:59', P);
 ObjectSet("PivotDJ", OBJPROP_COLOR, colorPivot);
 ObjectSet("PivotDJ", OBJPROP_WIDTH, 0);
 ObjectSet("PivotDJ", OBJPROP_STYLE, 0);
 ObjectSet("PivotDJ", OBJPROP_RAY, 0);
 ObjectSet("PivotDJ", OBJPROP_STYLE, STYLE_DASH);
// Drawing the 1st support line:
 ObjectCreate("Sup1", OBJ_TREND, 0, D'2007.02.13 00:00', S1, 
              D'2007.02.13 23:59', S1);
 ObjectSet("Sup1", OBJPROP_COLOR, colorSup1);
 ObjectSet("Sup1", OBJPROP_WIDTH, 0);
 ObjectSet("Sup1", OBJPROP_STYLE, 0);
 ObjectSet("Sup1", OBJPROP_RAY, 0);
 ObjectSet("Sup1", OBJPROP_STYLE, STYLE_DASH);
// Drawing the 1st resistance:
 ObjectCreate("Res1", OBJ_TREND, 0, D'2007.02.13 00:00', R1, 
              D'2007.02.13 23:59', R1);
 ObjectSet("Res1", OBJPROP_COLOR, colorRes1);
 ObjectSet("Res1", OBJPROP_WIDTH, 0);
 ObjectSet("Res1", OBJPROP_STYLE, 0);
 ObjectSet("Res1", OBJPROP_RAY, 0);
 ObjectSet("Res1", OBJPROP_STYLE, STYLE_DASH);

But there is more to come. It is necessary to add a signature text. It is easy to do.


// It is enough to create object "Text"
  ObjectCreate("PivotText", OBJ_TEXT, 0, 0, 0);
// and set its basic properties
  ObjectSetText("PivotText", "Pivot Point (DJ)", fontsize, "Arial", 
                colorPivot);
// Now it is possible to place it above already drawn lines 
// ObjectMove("PivotText", 0, D'2007.02.13 3:00',P);

As a result, we received the lines neatly drawn in the price chart:



Conclusion

Thus, we have studied the general ideas of trading using pivot points, opportunities to calculate lines on the base of the previous price values, and also ways of lines drawing given us by analysts (which is easier and much more convenient, than to draw them manually). I hope this article will help you to trade in markets and get profits!

Translated from Russian by MetaQuotes Software Corp.

Attachments:
Axel.mq4 (7.2 Kb)
AxelDel.mq4 (1.1 Kb)
Created: 2007.04.19  Author: Kushnarev Roman (www.profiforex.ru)
Warning: All rights to these materials are reserved by MetaQuotes Software Corp. Copying or reprinting of these materials in whole or in part is prohibited.
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1 comment  To add comments, please, log in or register
Hello MQ Team... and thank you for translating Roman's work... Pivot Calculation Using the Last Day Values as per the 1st graph... and... Daily, as per the 2nd graph... are the solutins I was looking for... Thank you Roman for creating your indicators...

With anticipation I placed the TWO into... \experts\indicators ... but they do not load onto the chart...

Would you please advise as to what could be wrong...? -Thank you.

Regards, EnkiJr
PS: All my other indicators are working fine...
2007.05.02 16:09 EnkiJr
1 comment