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Pivot Points - Weekly Cycle |
  
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Pivot Points - Weekly Cycle |
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Overview
Pivot points consist of a central pivot level surrounded by three support levels below it and three resistance levels above it. Pivot points were originally used by floor traders on equity and futures exchanges because they provided a quick way for those traders to get a general idea of how the market was moving during the course of the day using only a few simple calculations. However, over time pivot points have also proved exceptionally useful in other markets as well.
One of the reasons that pivot points are now so popular is because they are considered a "leading" (or predictive) indicator rather than a lagging indicator. All that is required to calculate the pivot points for the upcoming (current) trading week is the previous week's high, low, and close prices. For 24-hour markets like Forex, each broker determines when the trading week closes for their clients; however, Friday at 4:00PM ET or 5:00PM ET is common as a weekly closing day/time. 12:00AM ET on Monday is also a common weekly closing day/time.
The weekly cycle pivot points in this indicator are calculated according to the following formulas:
Pivot Point for Current Weekly Cycle = (High(Previous Weekly Cycle) + Low(Previous Weekly Cycle) + Close(Previous Weekly Cycle)) / 3
The central pivot point can then be used to calculate the support and resistance levels as follows:
Resistance 1 = (2 * Pivot Point) - Low(Previous Weekly Cycle)
Support 1 = (2 * Pivot Point) - High(Previous Weekly Cycle)
Resistance 2 = (Pivot Point - Support 1) + Resistance 1
Support 2 = Pivot Point - (Resistance 1 - Support 1)
Resistance 3 = (Pivot Point - Support 2) + Resistance 2
Support 3 = Pivot Point - (Resistance 2 - Support 2)
VT Trader also includes support and resistance mid-levels that are calculated as follows:
Resistance Mid-Level 1 = (Pivot Point + Resistance 1) / 2
Support Mid-Level 1 = (Pivot Point + Support 1) / 2
Resistance Mid-Level 2 = (Resistance 1 + Resistance 2) / 2
Support Mid-Level 2 = (Support 1 + Support 2) / 2
Resistance Mid-Level 3 = (Resistance 2 + Resistance 3) / 2
Support Mid-Level 3 = (Support 2 + Support 3) / 2
Interpretation
Pivot point levels can be used in many different ways. Here are a few of the most common methods for utilizing them.
Trend Direction Determined by Pivot Point: Combined with other technical analysis techniques such as overbought/oversold oscillators, volatility measurements, etc., the central pivot point may be useful in determining the general trending direction of the market. Trades are only taken in the direction of the trend. Buy trades occur only when the price is above the central pivot point and sell trades occur only when the price is below the central pivot point.
Price Breakouts: When trading price breakouts, a buy signal occurs when the price breaks up through the central pivot point or one of the resistance levels (typically Resistance 1). A sell signal occurs when price breaks down through the central pivot point or one of the support levels (typically Support 1).
Price Reversals: When trading price 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 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 direction.
Stop loss and/or Limit Profit Values Determined by Support/Resistance Levels: The central pivot point and its support and resistance levels may be potentially helpful in determining suitable stop loss and/or limit profit placements. For example, if trading a long breakout above the Resistance 1 level it may be reasonable to position a stop loss order just below the central pivot point and one or more limit profit(s) orders at the Resistance 2 and/or Resistance 3 levels.
Implementation
This Pivot Points indicator calculates the pivot points using a weekly cycle that resets at the specified predetermined day of the week and time of that day. The Calculation Time (Hour/Minute) is defined using a 24-hour clock (AM/PM is not used). For example, setting the Calculation Hour equal to 9 and the Calculation Minute to 00 recalculates the pivot points each day at 9:00 AM while setting the Calculation Hour equal to 17 and the Calculation Minute to 30 recalculates the pivot points on the specified day at 5:30PM.
Please Note: This indicator will not function properly on the following chart intervals: Tick, 1-Minute, Weekly, or Monthly. It is not possible for VT Trader to load enough data into a Tick or 1-Minute chart interval for the indicator to properly calculate the pivot points and the calculations performed are not designed (nor can they be reprogrammed) to function in the Weekly or Monthly chart intervals.
If the pivot points do not display in the chart window once the indicator is attached, you may need to increase the number of bars that VT Trader loads into its charts. As minimum amounts, VT Trader should load 3,500+ bars into its charts if you intend to attach this Pivot Points indicator to any 5-Minute interval charts or 2,000+ bars if you intend to attach it to any 10-Minute or higher interval charts.
Construction
1. Click the Ribbon>Technical Analysis menu>Indicators group>Indicator Builder command>Indicator Builder window's [New] button
2. In the General tab, type the following text for each field:
Name: Pivot Points - Weekly Cycle
Function Name Alias: vt_PPIWeekly
Label Mask: Pivot Points -Weekly Cycle (Calculation Time: %CalculationDay:ls%, %CalculationHour%:%CalculationMinute%)
PP = %PivotPoint%, R1 = %Resistance1%, R2 = %Resistance2%, R3 = %Resistance3%
S1 = %Support1%, S2 = %Support2%, S3 = %Support3%
Placement: Price Frame
Data Inspection Alias: Pivot Points - Weekly Cycle
3. In the Input Variable(s) tab, create the following variables:
[New] button...
Name: CalculationDay
Display Name: Calculation Day
Type: Enumeration
Default: click [...] button, [New] button, then create the following entries:
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
... then, click [OK] button
Default: Monday
[New] button...
Name: CalculationHour
Display Name: Calculation Hour
Type: integer
Default: 0
[New] button...
Name: CalculationMinute
Display Name: Calculation Minute
Type: integer
Default: 0
[New] button...
Name: ShowMidLevels
Display Name: Show Mid-Levels?
Type: Enumeration
Default: click [...] button, [New] button, then create the following entries:
No
Yes
... then, click [OK] button
Default: No
4. In the Output Variable(s) tab, create the following variables:
[New] button...
Var Name: Resistance3
Name: (R3)
Line Color: light blue
Line Width: slightly thicker
Line Type: solid
[New] button...
Var Name: ResistanceMidLevel3
Name: (R3 ML)
Line Color: light blue
Line Width: thin
Line Type: dashed
[New] button...
Var Name: Resistance2
Name: (R2)
Line Color: blue
Line Width: slightly thicker
Line Type: solid
[New] button...
Var Name: ResistanceMidLevel2
Name: (R2 ML)
Line Color: blue
Line Width: thin
Line Type: dashed
[New] button...
Var Name: Resistance1
Name: (R1)
Line Color: dark blue
Line Width: slightly thicker
Line Type: solid
[New] button...
Var Name: ResistanceMidLevel1
Name: (R1 ML)
Line Color: dark blue
Line Width: thin
Line Type: dashed
[New] button...
Var Name: PivotPoint
Name: (Pivot Point)
Line Color: black
Line Width: very thick
Line Type: solid
[New] button...
Var Name: SupportMidLevel1
Name: (S1 ML)
Line Color: dark red
Line Width: thin
Line Type: dashed
[New] button...
Var Name: Support1
Name: (S1)
Line Color: dark red
Line Width: slightly thicker
Line Type: solid
[New] button...
Var Name: SupportMidLevel2
Name: (S2 ML)
Line Color: red
Line Width: thin
Line Type: dashed
[New] button...
Var Name: Support2
Name: (S2)
Line Color: red
Line Width: slightly thicker
Line Type: solid
[New] button...
Var Name: SupportMidLevel3
Name: (S3 ML)
Line Color: light red
Line Width: thin
Line Type: dashed
[New] button...
Var Name: Support3
Name: (S3)
Line Color: light red
Line Width: slightly thicker
Line Type: solid
5. In the Horizontal Line tab, create the following lines:
This indicator requires no horizontal lines.
6. In the Formula tab, copy and paste the following formula:
_DayOfWeek:= DayOfWeek();
_Hour:= Hour();
_Minute:= Minute();
CalculationTime:= Cross((_DayOfWeek=CalculationDay AND _Hour>=CalculationHour AND _Minute>=CalculationMinute),0.5);
CalculateLookBackPeriods:= Barssince(CalculationTime=1);
LookBackPeriods:= valuewhen(1, Cross(0.5,CalculateLookBackperiods), ref(CalculateLookBackPeriods,-1));
_H:= valuewhen(1,CalculationTime=1,ref(HHV(H,LookBackPeriods),-1));
_L:= valuewhen(1,CalculationTime=1,ref(LLV(L,LookBackPeriods),-1));
_C:= valuewhen(1,CalculationTime=1,C);
PivotPoint:= (_H+_L+_C)/3;
Resistance1:= 2 * PivotPoint - _L;
Resistance2:= PivotPoint + (_H-_L);
Resistance3:= 2 * PivotPoint + (_H-2*_L);
Support1:= 2 * PivotPoint - _H;
Support2:= PivotPoint - (_H-_L);
Support3:= 2 * PivotPoint - (2*_H-_L);
ResistanceMidLevel1:= if(ShowMidLevels=1, (PivotPoint+Resistance1)/2, null);
ResistanceMidLevel2:= if(ShowMidLevels=1, (Resistance1+Resistance2)/2, null);
ResistanceMidLevel3:= if(ShowMidLevels=1, (Resistance2+Resistance3)/2, null);
SupportMidLevel1:= if(ShowMidLevels=1, (PivotPoint+Support1)/2, null);
SupportMidLevel2:= if(ShowMidLevels=1, (Support1+Support2)/2, null);
SupportMidLevel3:= if(ShowMidLevels=1, (Support2+Support3)/2, null);
7. Click the "Save" icon to finish building the Pivot Points - Weekly Cycle indicator.