How to Day Trade Bitcoin with Pivot Points

Pivot Points are used by traders to find support and resistance levels based on the previous day's Bitcoin prices.

Pivot points indicators uses the previous day's high, low and closing price to project support and resistance levels for future Bitcoin prices.

Pivot Points indicator provides an idea of where key support and resistance levels should be. Once a trader places this indicator on the BTCUSD chart, the resistance and support levels of Bitcoin prices will be plotted on the BTCUSD Bitcoin trading chart. These support and resistance levels are used by Bitcoin traders to determine market tops, market bottoms and also areas where the trend is likely to reverse or retrace.

The Daily Pivot Points are calculated from the previous day's high, low and closing prices. The Pivot Point indicator is shown below.

Pivot Points Indicator - Bitcoin Trading

Technical Analysis of Pivot Points

The central pivot point is primarily used to determine the trend.

The other support and resistance levels are also important in calculating areas that can generate significant market movements.

Pivot Point Indicator can be used in Two Ways:

The first method is for determining the general Bitcoin price trend:

• If the pivot point is broken in an upward trend movement, then the market is bullish
• If the pivot point is broken in a downward trend movement, then the market is bearish

However, Bitcoin traders should note that pivot points are short term trend indicators, useful for only one day until they need to be recalculated.

The second method is to use these pivot points to enter and exit trades. This indicator is very useful when it comes to calculating the areas that are likely to cause price movements and traders can then use these points to determine whether to open a trade or to close a trade.

Trading signals generated using pivot points indicator should also be used together with another technical indicator so as to confirm these trading signals.

Other technical indicators that can be combined with Pivot Point indicator are Moving Averages, MACD and RSI.

The example below shows the Moving Average indicator which can be combined with pivot point indicator to confirm the trading signals generated by the pivot point indicator.

Moving Average Indicator - Moving Average Crossover Trading System

These moving averages can be used to confirm the direction of the continuing market trend or they can also be used to confirm a price reversal signal. Once a trading signal is generated by the pivot point indicator then a trader will use the moving average indicator to confirm the signal. If both indicators give a signal in the same direction then a trader can open a trade - if not a trader should wait until the signal generated by the pivot point indicator is confirmed by the Moving average crossover trading system shown above.

Pivot Points Trading Setups

Trend Continuation Trading: The central pivot point is useful in determining the general trending direction of the prices of Bitcoin (BTCUSD). Trades are only opened in direction of the current trend. A buy signal occurs only when the market is above the central pivot point and a sell signal occurs only when the market is below the central pivot point.

Price Breakouts Trading: A bullish signal occurs when the market breaks up through the central pivot point or one of the resistance levels (typically Resistance 1). A bearish signal occurs when the market breaks down through the central pivot point or one of the support levels (typically Support 1).

Trend Reversals:

• A buy signal occurs when the price moves towards a support level, gets very close to it, touches it, or moves only slightly through it, and then reverses and moves back in the opposite upward direction.
• A sell signal occurs when the price moves towards a resistance level, gets very close to it, touches it, or moves only slightly through it, and then reverses and moves back in the opposite downward direction.

Stop loss and/or Take Profit Values Determined by Pivot Point Support/Resistance Levels: Pivot point indicator is helpful in determining suitable stop loss and/or take profit levels. For example, if trading a buy long signal generated by a breakout above the Resistance 1, it may be reasonable to position a stop loss just below the central pivot point or just below.