Support and Resistance TradingView Indicator: The Pivot Point Trading Strategy
Understanding support and resistance levels is crucial for any trader looking to trade the markets effectively. One powerful tool that can help identify these levels is the Pivot Points High and Low indicator on TradingView. In this guide, we'll walk you through setting up this indicator, customizing its settings, and using it to enhance your trading strategy potentially.
Setting Up a Clean Chart in TradingView
To begin, open up a clean chart on TradingView. You can use this indicator on virtually any timeframe, but for this article, we'll look at Bitcoin on the daily timeframe. If you don't have access to TradingView yet, it's a highly recommended platform for chart analysis.
Adding the Pivot Points High and Low Indicator
Access the Indicators Tab: Click on the "Indicators" tab at the top of the TradingView interface.
Search for the Indicator: In the search bar, type "Pivot Points High and Low".
Select the Correct Indicator: You'll see multiple options, but the one we're interested in is simply called "Pivot Points High and Low".
Once added, you'll notice that multiple high and low points appear on your chart. These are the pivot highs and pivot lows that we'll be using to identify support and resistance levels.
The Pivot Points High Low Indicator in TradingView
Customizing the Indicator Settings
The default settings might display too many pivot points, making the chart look cluttered. To make the the pivot points more significant and the indicator potentially more effective:
Access Indicator Settings: Click on the gear icon next to the indicator's name.
Adjust the Style:
Go to the "Style" tab.
Depending on your background on TradingView, you might want to change the colors of the pivot highs and pivot lows to something more visible.
Modify the Inputs:
Navigate to the "Inputs" tab.
Increase the "Pivot Time Back" and "Pivot Time Forward" values to make the pivot points more significant. For instance, setting both to 20 means that a pivot high or low will only be marked if it stands out among 20 candles to the left and right.
By increasing these values, you're filtering out minor fluctuations and focusing on significant highs and lows, which are more relevant for identifying key support and resistance levels.
Pivot Points High Low Indicator Settings
Understanding Pivot Points
A pivot point, in trading terms, is a significant high or low point on the chart. A pivot high is a candlestick that has lower highs on both the left and right sides, while a pivot low has higher lows on both sides. By identifying these points, traders can spot potential significant areas where the price may be more likely to reverse or see other important price action signals.
Identifying Support and Resistance Levels
With the pivot points plotted on your chart, you can start identifying areas where multiple pivot highs or lows cluster together. These clusters can often indicate strong support or resistance levels.
Draw Support Zones: Look for areas with multiple pivot lows close to each other. Use the rectangle tool to draw a zone encompassing these points.
Draw Resistance Zones: Similarly, identify areas with multiple pivot highs and draw a zone around them.
These zones represent areas where the price has historically had difficulty moving past, making them more likely to be significant for future price action and market structure analysis.
Support and Resistance Indicator in TradingView
Applying the Pivot Point Trading Strategy
Using the support and resistance levels identified with the pivot points, you can enhance your trading strategy:
Plan Entries and Exits: Consider entering trades when the price approaches these key levels. For instance, you might look to buy when the price reaches a strong support zone or sell when it hits a resistance zone.
Set Stop Losses: Place stop-loss orders just beyond these levels to manage risk effectively.
Combine with Other Indicators: For a more robust strategy, consider combining pivot points with other indicators like moving averages or RSI.
TradingView offers a wide range of indicators that you can use alongside pivot points to strengthen your analysis.
Practical Example
Suppose you're analyzing Bitcoin on the daily chart:
Set the Pivot Lengths: In the indicator settings, set both the pivot high and low lengths to 20.
Identify Key Levels:
Notice a cluster of pivot lows around the $30,000 level, indicating strong support.
Identify pivot highs around the $40,000 level, suggesting strong resistance.
Plan Your Trade:
Consider buying if the price approaches $30,000, anticipating a bounce from support.
Plan to take profits or consider selling as the price nears $40,000.
By using the pivot points to identify these key levels, you can possibly make more informed trading decisions.
Benefits of Using the Pivot Points High and Low Indicator
Simplicity: The indicator is straightforward to use, even for beginners.
Visual Clarity: It provides clear visual cues on the chart, making it easier to spot significant levels.
Customizable: You can adjust the settings to focus on the most relevant pivot points for your trading style.
If you're not already using TradingView, it's an excellent platform that provides all the tools you need for effective chart analysis, including the Pivot Points High and Low indicator.
Conclusion
Identifying support and resistance levels is a fundamental aspect of technical analysis. By using the Pivot Points High and Low indicator on TradingView, you can enhance your ability to spot these critical levels and improve your trading strategy. Remember to adjust the indicator settings to focus on significant pivot points and consider combining this tool with other indicators for even better results.
