The pivot point itself is the primary support/resistance for Nifty. This means that the largest price movement is expected to occur at this price. The other support and resistance levels are less influential, but may still generate significant price movements
The first way is for determining the overall market trend: if the pivot point price is broken in an upward movement, then the market is bullish, and vice versa. Keep in mind, however, that pivot points are short-term trend indicators, useful for only one day until it needs to be recalculated
Using Pivot Points in NIFTY Options Trading
Pivot acting as Support
Pivot acting as Resistance
The second method is to use pivot point price levels to enter and exit the markets. For example, a trader might put in a limit order to buy 100 shares if the price breaks a resistance level. Alternatively, a trader might set a stop-loss for his or her active trade if a support level is broken.
Pivot points theory is powerful tool for any trader. It enables anyone to quickly calculate levels that are likely to cause price movement. The success of a pivot-point system, however, lies on the psychological decisions of the trader, and on his or her ability to effectively use the pivot-point systems in conjunction with other forms of technical analysis.
A day trader can use daily data to calculate the pivot points each day, a swing trader can use weekly data to calculate the pivot points for each week and a position trader can use monthly data to calculate the pivot points at the beginning of each month.
Investors can even use yearly data to approximate significant levels for the coming year. The trading philosophy remains the same regardless of the time frame. That is, the calculated pivot points give the trader an idea of where support and resistance is for the coming period, but the trader – because nothing in trading is more important than preparedness – must always be prepared to act.
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