Daily Pivot Point Indicator for NT8

Pivot Point Indicator for NT8

In this month’s Indicator Spotlight, we’re looking at the daily Pivot Points indicator. 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 the Daily Pivot Point Indicator

The daily Pivot Point indicator applies 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.

Combining Pivot Levels with the Opening Range

One approach to trading with the pivot levels was presented by Mark Fisher in his book the “Logical Trader”. In it, he describes the ACD system and how the pivot point indicator can be used together with the Opening Range.

The regular open and the following minutes is the most dynamic and active period of the trading day. It frequently sees major breakouts and reversals and according to Fisher, it is statistically significant. Specifically, this time window marks the high or low for the day about 20 percent of the time, refuting the random walk theory of the markets.

Fisher describes Opening Range time periods of anywhere between 5 and 45 min, depending on the market. The core idea here is simply establishing breakouts above or below that range (additional details in our previous post on the Opening Range Breakout and on a Opening Range Breakout Strategy)

Furthermore, Fisher establishes an offset of ticks above / below Opening Range. These are referred to as the A and C levels and used to improve the statistical probabilities of Opening Range setups.

For example, one may consider long positions once the upper A level is broken setting the stop loss at the Opening Range low. Conversely, a short entry would trigger at the break of the lower C level. The stop loss for that position would be at the Opening Range high.

Pivot point indicator levels and the Opening Range
ACD Offsets

The ACD Offset

The offset is determined partly on where the Opening Range and current session close plots are located compared to the Pivot Range. For example, he distinguishes between plus and minus days:

  • A plus day is an Opening Range that plots below the Pivot Range and that ends with a close above the Pivot Range.
  • A minus day is an Opening Range that plots above the Pivot Range and that ends with a close below the Pivot Range.

In addition he looks at the overall picture of the market by using a rolling pivot range as well as an hourly pivot for short term trading.

Still, big changes have taken place since Fisher first published his book. In todays algo driven and high frequency traded markets, significant moves will occur during the first minute of the open. In addition, pre-session highs and lows are now important support resistance levels. These highs and lows, set during Asian and European sessions and will often be the first test and indicaton of what direction the market will take next.

ETH vs. RTH Pivots

Traditionally, the daily Pivot Point indicator plotted 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.

The ETH Pivot Point indicator levels are calculated by taking the prior day high, low and close of the full session. It therefore includes the 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.

Full Session Pivots NT8
Globex Pivots using high/low levels from yesterday’s full session

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 Pivot Point indicator levels. Therefore, these levels are created by using the high, low and close of the regular session.

Floor Pivots for NT8
Floor Pivots using high/low levels from yesterday’s regular session

Premium vs. Library Pivots

With NinjaTrader 8, we changed the architecture for the Pivot Point 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 Pivot Point indicator 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 Pivot Point indicators also allow you to selecting the settlement price, instead of the regular close, as a basis for the 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.

The Daily Pivot Points indicator is available for NinjaTrader 8. Visit the indicator library now to download:

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 the RTH pivot point indicator levels. This applies to index futures, bonds and certain commodities.

To have a look at all the different library vs. premium features side by side, you may do so here. Visit our premium section now to learn more.