Introduction
Mastering any skill takes expertise and practice, and the same holds true for trading in the stock market. While many traders use various indicators, it's the proper use of these tools that sets expert traders apart from the rest. One common yet powerful indicator in the stock market is the Pivot Point. In this blog, I'll guide you through the correct usage of the Pivot Point indicator and share a simple but effective trading strategy to help you make consistent profits.
To apply the Pivot Point indicator correctly, you need to use a charting platform like TradingView and, in the type, set the indicator parameters to "Fibonacci" from "Traditional."
The Strategy
We'll be focusing on the 5-minute time frame for this example.
1. Long Trade
When a candle breaks above the Pivot Point resistance, wait for a retest of the resistance level or a temporary dip in price, followed by an upward movement. Once you see this, it's an indication to enter a buy trade.
Set your stop loss at the low of the breakout candle and aim for the next 3 or 4 candles as your target.
If the price doesn't move in your favor for 3 to 4 consecutive candles, consider exiting the Trade and look for a new opportunity.
2. Short Trade
On the contrary, for a short trade, wait for a candle to break below the Pivot Point support. Then, watch for a retest of the support level or a temporary rise in price, followed by a downward movement.
Once you observe this, it's time to enter a sell trade. Set your stop loss at the high of the breakout candle and target the next 3 or 4 candles.
Just like in the long Trade, if the price doesn't move in your favor for 3 to 4 consecutive candles, consider exiting the Trade and look for new prospects.
Backtesting and Results
To gauge the effectiveness of this strategy, we conducted a backtest on 16 days of historical data because, in the Tradingview free version, only a 16-day backtest is allowed with this Pivot indicator.
Out of the 16 days, 2 trades didn't yield any significant movement, resulting in break-even exits. However, 13 trades were profitable, giving us an impressive 81% winning rate. The gross profit amounted to 312.50 points. After factoring in brokerage charges and other expenses (estimated at 56.40 Rs per lot), the net profit stood at a remarkable 14,779 Rs.
Conclusion
Mastering the Pivot Trading Strategy can lead to consistent profits in the stock market. Always adhere to the rules of the strategy and be disciplined in your trading approach.
Remember, patience and discipline are the keys to success in trading.
If you follow this strategy diligently, you can aim to make a steady income of 14,000 to 15,000 Rs monthly.
We hope you found this strategy helpful.
Please leave your valuable comments, like, and share this blog so that everyone can learn and earn from the market.
Disclaimer
This blog post is for informational purposes only and should not be considered as financial or investment advice. Trading in financial markets involves risk, and past performance is not indicative of future results. Always conduct your research and seek professional advice before making any trading decisions. The author and publisher are not responsible for any losses incurred from the use of the information provided in this post.
