Pivot Points Explained for Day and Swing Trading with David Moadel
welcome to looking at the markets with David Modell here's an indicator that
gives you not only an entry point but also stop losses and profit targets not
too many indicators do that these are called pivot points and I'm gonna try to
explain it as best as I can first I'll show how you can use it as a
swing trader and then as a day trader later in this video okay so this is
stockcharts.com it's a daily candlestick chart for Apple stock and so here we see
a number of levels here there's P that's the pivot point all right and then
you've got R 1 and R 2 those are your profit targets and then you've got s 1
and s 2 those are your stop losses if you're a
buyer if you're going to take a long position if you're shorting then it's
the opposite but we'll talk about that okay so when would you according to the
pivot point system when would you buy well let's say let's pretend and this is
not actually true with these candles so pretend these candles aren't here ok
let's just pretend that the candlesticks are below P the pivot point and then
they clearly break above it all right a clear break not just kind of dancing on
the line but clearly you know breaks and closes candlestick closes above P all
right then you can take a long position you can buy the stock according to the
pivot point system all right and what's your stop-loss it is s 1 that's when you
get out all right and you take a small loss
what is your profit target r1 that's your first profit target all right so it
gives you the entry point and your stop-loss and your profit target all
right and you could just keep it simple you could just buy it if it breaks above
the pivot point above P if it closes above it and then just sell it at r1 ok
or sell it at s1 if it goes down now let's say you're willing to take a
little bit more risk you like to let your winners run cool ok and maybe
you're into trailing stops all right that's cool you can use it that way so
let's say all right so it it closes above the pivot point
you buy it and then it goes up to r1 and but let's say it's going up really fast
like it breaks not just barely above r1 okay it really shoots like a just like a
rocket okay it closes way above it and let's say also you're looking at the
volume and you see a big green volume bar all right so there's lots of
conviction lots of volume behind that move well what you can do according to
the pivot point system is just let your winner run why take profits there if
it's shooting like a rocket you can let it let it go up more all the way up to
r2 and so now if there's lots of conviction lots of volume and it's just
fast movement above r1 then you can decide okay you know what I'm gonna let
my winner run and now your profit target can be not r1 but r2 r2 can be your new
profit target and your new stop-loss is now it's not s1 anymore now your
stop-loss is P alright so everything moves up it's kind of like a trailing
stop it's pretty cool alright and that's up to you so just to recap you can buy
it if it breaks clearly above the pivot point P if it closes above it and then
your first profit target is art r1 your first stop loss is s1 and if it just
kind of goes up to it barely not with much conviction you could just take a
profit here but if it's like a shooting like a rocket above it then you can make
your new profit target R - and your new stop-loss is P okay now what if you like
to short a stock well let's say and again it didn't happen here but let's
pretend that you've got the candlestick above P above the pivot point and then
it goes clearly decisively below P the pivot point that did not happen here it
just kind of danced on it right on the pivot point didn't clearly break below
it so you would not take a short position here but let's say let's
pretend that it broke and closed clearly below the pivot point P okay
so your first profit target would be s1 your first stop loss would be r1 and if
it just kind of touches here not with much conviction at s1 you can take
profits if it's like a falling knife and it shoots way below it and if there's a
big red volume bar to show you there's can that there's conviction behind the
move then you can let your winner run and you could make your new profit
target s2 and your new stop-loss would be P instead of r1 now it's P all right
so it's just the opposite of if you took a long position you just reverse
everything all right so that's what it would look like as a date I'm sorry as a
swing trader let's say if you're a day trader that's cool you can go to trading
view calm and what's cool about this I should have put the volume bars on here
okay but and this is the Apple chart but it's the 15-minute chart day traders
might use the fifteen minute or five minute one minute whatever you like all
right I just put this up as an example and as you can see oh by the way I
forgot to mention what's interesting about this is that they recalibrate the
pivot points every so often all right because the price is changing and so the
pivot points points keep changing so you have to be aware that it's going to
change every once in a while and here it is they change it from time
to time they shift and move it over to adjust with the new price of the stock
so this is a 15-minute chart and what's cool about this on trading view is that
they have not only the pivot point an R 1 s 1 R 2 s 2 like you saw on stock
charts calm this goes even further this is R 3 R 4 R 5 and below it s 2 3 4 and
S 5 so you can really let your winners run here you really get something like a
trailing stop if you will alright so if it if it breaks clearly above P and
closes above it you can make your first profit target if you're going long if
you're buying your first profit target would be R 1 with your stop loss
at at s1 okay and then but if it just keeps going up
really fast with conviction and volume then you can you can let it let your
winners run your next profit target can be r2 and then you would change your
stop-loss to P and then your next if it just keeps going let it run if you want
to your next profit target target can be r3 and you would change your stop-loss
to r1 and so on and so forth all the way up to our v alright so I think it's
pretty neat and check it out yeah I recommend that you virtual or pay per
trade it first just to make sure this is right for you you know always limit your
risk and make your own decisions but if you want a really simple system with
everything in place your entry point your profit target your stop-loss
it's like a trailing stop almost and it keeps adjusting with the price it comes
out with new every every so often it's got new levels new pivot points and so
on I think it's pretty neat it's something you can look at and it's
almost in all-in-one indicator you might not even need anything else if you don't
want to all right so I hope you found this helpful please subscribe to my
channel if you haven't done that already and hit that Bell on YouTube so you can
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this video a thumbs up and leave comments do you like pivot points do you
use it let me know it's pretty cool right
also I help people I coach people on how to use these things on trading and
investing and technical indicators fundamentals things like that so if you
want some help you can email me anytime my name is David Modell my email address
is David Modell at gmail.com thank you so much for watching and listening I'll
talk to you again soon