Floor Pivots: RTH vs. ETH

In this month’s Indicator Spotlight, we’re looking at the Daily Session Pivots. These levels are well known intraday price benchmarks and are still considered among the most reliable methods for determining key support and resistance. To learn more, watch the video or continue reading below:

 

 

About Pivots

The pivot calculation is a simple range calculation with added weight to the close. A daily pivot is found by taking the prior day high, low and close by 3: (H+L+C)/3.

A pivot range may also displayed around the main pivot (PP), it is comprised of a Central and Directional Pivot (DP). The Central Pivot (CP) is calculated by taking the prior day high and low, and dividing by 2: (H+L)/2. The DP equals the distance between the PP and the CP, wrapped in the direction of the prior day close, to mark the current bias.

Four (4) major support / resistance levels are located above and below the main pivot. Generally, the most powerful levels are the first and second levels. The distance between the first support (S1) and resistance (R1) level, equals the prior day range. When the market is trading in this area, it‘s range bound.

The distance from the main pivot to the second resistance (R2) level also equals the prior day trading range. The same goes for the second support (S2) level. Because it takes quite a move in order to trade beyond the prior day range, measured from the main pivot, the R2 will often mark the high of the day, whereas S2 will mark the low of the day.

ETH vs. RTH Pivots

Traditionally, pivot levels were created by by taking the high and low levels of the regular session. However, with markets now trading around the clock, we can distinguish between ETH, or GLOBEX pivots vs. regular session, or RTH pivots.

ETH pivots are calculated by taking the prior day high, low and close of the full session, including overnight price action. The ETH pivot levels are appropriate for instruments that do not have a local bias, and that never had a tradition for pit trading at a centralized exchange. Examples for this scenario includes FOREX instruments and “universal” commodities such as gold.

Traditional floor pivots (RTH) on the other hand are calculated by taking the prior day high, low and close of the regular session. The regular session refers to the local time when the overwhelming majority of volume and trading activity takes place at a specific exchange. This situation applies to index futures, bonds and certain commodities. The local traders of these markets will use RTH levels as reference points and therefore, pivot levels should reflect the high, low and close of this time window.

Premium vs. Library Pivots

With NinjaTrader 8, we changed the architecture for the pivot indicators. An important reason was that a set of complex session templates for each instrument were required in order to create correct pivot levels in NinjaTrader 7. With the update to NT8, we have instead created a trading hours database with presets for all major futures contracts. Accordingly, the NinjaTrader 8 versions may be used with the default templates <instrument settings> that come with NinjaTrader 8 for both ETH and RTH pivots.

A side effect of this improvement is that the library pivots may no longer be used to display RTH pivots on ETH charts. It is only possible to create RTH pivots with the premium versions. Specifically, the premium version calculates RTH pivots by using a secondary minute bars series. The RTH pivots are now 100% correct when applied to exotic bar types, such as Renko bars.

With the library pivots, you may create daily, weekly, monthly and N-monthly pivot levels from the full session (ETH). You may also choose between different pivot formulas, namely Floor Pivots, Wide Pivots, Jackson Zones and Fib Pivots. The library pivots also allow you to selecting the settlement price, instead of the regular close, as a basis for the pivot calculation (assuming your data provider supplies this information, i.e. the settlement price).

In the event that you keep your machine running overnight, the premium version also has an option to autoload daily data (to catch the settlement price). Conversely, if you connect in the morning, the daily data will be loaded via the indicator itself so that you won’t have to load it separately. When set to “Daily Bars” the library version will display correct pivots for extended trading days, that occur after public (US) holidays. The premium pivots will always display correct pivots following a public holidays as these indicators come with a holiday calendar.

Finally, the premium versions also have an option to plot pivot projections for the next day, week or month prior to the completion of the current period. The projections are based on the current period high, low and the last traded price. You may also add a 3 day Balance Point to display a rolling central pivot. A separate rolling pivot indicators series is available in the premium package to create daily, weekly or monthly rolling pivot levels.

If you want to have a look at all the different library vs. premium features side by side, you may do so here.

To download the Daily Pivots indicator, visit our indicator library now:

 

Conclusion:

Additional premium features, such as rolling pivots, projections, autoload of daily data and improved graphical design are certainly "nice to have". However, if you trade markets that have a local bias, the premium pivots are next to mandatory. Because an overwhelming majority of volume and trading activity takes place in this time window, traders will use RTH levels as reference points. This applies to index futures, bonds and certain commodities. Visit our premium section now to learn more.