Pivot Points (PP) User Guide

Table of Contents

1. Overview and Features
2. Installation and Settings
   • Installation
   • Settings
3. Pivot Points and Pivot Orders
   • Pivot Points
   • How Pivot Points Are Calculated
   • Pivot Orders
   • Hierarchical Pivot Orders
   • Practical Applications of Pivot Orders
4. Insights
   • Trading Applications
     • Market Structure Analysis
     • Trend Confirmation and Continuation
     • Reversal Opportunities
     • Risk Management
   • Advanced Insights
     • Bar Strength Analysis
     • Timeframe Integration
     • Volume and Pivot Dynamics
   • Practical Examples
     • Scalping
     • Swing Trading
5. Technical Reference Guide
   • Buffer Organisation
     • Bar Strength Buffer
     • Pivot Shift Buffers

Overview and Features

The Pivot Points Indicator (PP) is a sophisticated technical analysis tool that revolutionises traditional pivot point analysis by identifying and ranking price pivots based on their market significance. Through its unique hierarchical system, PP helps traders identify key market structure levels and potential reversal points with unprecedented clarity, while also providing detailed technical data for advanced analysis.

Key Features

• Multi-Order Pivot Analysis
  Identifies six distinct levels of pivot significance:

  • Zero Order Pivots: Immediate price turning points with no lower/higher bars on either side
  • First Order Pivots: Short-term reversal points with lower/higher bars on both sides
  • Second & Third Order Pivots: Significant support/resistance levels showing established market structure
  • Fourth to Sixth Order Pivots: Major market structure points indicating dominant trend levels

• Bar Strength Measurement
  Evaluates the significance of each pivot point through:

  • High Bar Strength: Count of preceding bars with lower highs
  • Low Bar Strength: Count of preceding bars with higher lows
  • Automatic strength calculation and real-time updates

• Advanced Data Storage
  Sophisticated data management through multiple buffers:

  • Bar Strength Data: Separate tracking for highs and lows
  • Pivot Shift Values: Precise location data for each order
  • Technical Analysis Integration: Accessible data for custom analysis

• Clear Visual Signals
  Provides easy-to-interpret chart markings:

  • Different colors for different pivot orders
  • Clear labeling of pivot significance
  • Visual hierarchy of market structure
  • Real-time pivot formation indication

• Market Structure Analysis
  Helps traders:

  • Identify major support and resistance zones
  • Spot potential reversal points early
  • Understand market structure development
  • Access detailed pivot data for analysis

The PP indicator transforms complex market structure analysis into clear, actionable trading signals while providing deep technical data for advanced analysis. Whether you’re a day trader looking for precise entry points, a swing trader analysing larger market moves, or a technical analyst requiring detailed pivot data, PP offers both visual clarity and technical depth for comprehensive market analysis.

Installation and Settings

Installation

1. Install the Indicator:

   • • Download the Pivot Points Indicator (PP.ex5) and place it in the Indicators\NTL folder of your MQL5 platform directory. If the folder doesn’t exist, create it manually.
   • Restart MetaTrader 5 platform
   • Verify PP appears in your Navigator window under Indicators\NTL.

2. Apply to Chart:

   • Open desired chart
   • Drag PP from Navigator onto chart, or
   • Double-click PP in Navigator
   • Configure settings in dialog window

Settings

• Highest Order
  Specifies maximum pivot order to display (default: 6)

  • Higher values (4-6): Major market structure
  • Middle values (2-3): Intermediate structure
  • Lower values (0-1): Short-term price action
  • Recommended: Start with orders 1-3 for learning

• Visual Settings

  • Colors: Customise colors for each pivot order
  • Width: Adjust line thickness (dot size)

Pivot Points and Pivot Orders

Pivot Points

In the Pivot Points Indicator (PP), pivot points are dynamically calculated based on bar strength and price action rather than static formulas. These pivots represent significant market turning points derived through hierarchical analysis of price highs and lows.

How Pivot Points Are Calculated

1. Bar Strength Evaluation:

   • Bar strength is determined by counting the number of preceding bars with:
     • Lower highs (for identifying high pivots).
     • Higher lows (for identifying low pivots).
   • The count stops as soon as a higher high or lower low is encountered, confirming the pivot.

2. Pivot Validation Rules:

   • Zero Order Pivots: A bar qualifies as a zero-order pivot if no surrounding bars (on its immediate left or right) have higher highs (for high pivots) or lower lows (for low pivots).
   • Higher Order Pivots: These are calculated recursively:
     • A first-order high pivot requires a lower high on its left and right.
     • A second-order high pivot requires first-order pivots on its left and right, and so forth.

3. Dynamic Updates:

   • The pivots are recalculated in real-time as new bars form, ensuring the representation of the most current market structure.

Pivot Orders

Pivot orders classify the significance of pivot points within a hierarchical system, where higher-order pivots are more significant than lower-order pivots.

Hierarchical Pivot Orders

• Zero Order Pivots:
  • High: No lower high on immediate left and right.
  • Low: No higher low on immediate left and right.
• First Order Pivots:
  • High: Requires lower highs on both left and right.
  • Low: Requires higher lows on both left and right.
• Second to Sixth Order Pivots:
  • Each subsequent order requires preceding lower-order pivots on both sides.

Practical Applications of Pivot Orders

1. Trend Identification:
   • Higher-order pivots often indicate significant trend reversals or continuations.
2. Support and Resistance Levels:
   • High-order pivots align with major support or resistance zones.
3. Risk Management:
   • Use pivot hierarchy to position stops and targets, with lower-order pivots for short-term trades and higher-order pivots for long-term setups.

By leveraging this methodology, the PP Indicator enables traders to accurately analyse market structure, anticipate potential reversals, and implement precise entry and exit strategies

Insights

The Pivot Points (PP) indicator provides a comprehensive framework for market analysis, helping traders refine their strategies by leveraging dynamically calculated pivot points and hierarchical orders. This section explores practical applications, emphasising how to interpret bar strength and pivot orders effectively for tactical and strategic decisions.

Trading Applications

1. Market Structure Analysis:

   • Use higher-order pivots (4-6) to locate critical support and resistance levels.
   • Identify potential breakouts or reversals by observing lower-order pivots (1-3) within larger structures.
   • Watch for pivot clusters—multiple orders aligning at similar levels—to highlight key price zones.

2. Trend Confirmation and Continuation:

   • Confirm trends with sequential higher-order pivots.
   • Time entries within an ongoing trend using lower-order pivots.
   • Monitor breaking pivots for potential trend reversals:
     • Higher-order pivot breaks often signal major shifts.
     • Lower-order breaks can indicate short-term momentum.

3. Reversal Opportunities:

   • Identify reversals using divergences between pivot formations and price action.
   • Key signals include:
     • High-order pivots forming against the prevailing trend.
     • Multiple pivot orders converging near key levels.

4. Risk Management:

   • Set stops and targets using the pivot hierarchy:
     • Short-term trades: Place stops around lower-order pivots.
     • Longer-term trades: Base stops on higher-order pivots.
   • Scale position sizes relative to the distance between entry and pivot levels.

Advanced Insights

1. Bar Strength Analysis:

   • Higher bar strength indicates more reliable pivots.
   • Use real-time strength updates to validate pivot significance and adjust strategies proactively.

2. Timeframe Integration:

   • Compare pivot formations across timeframes to find confluence.
   • Use divergences between timeframes to anticipate potential market turns.

3. Volume and Pivot Dynamics:

   • Correlate volume data with pivot formations to gauge market sentiment.
   • High volume at higher-order pivots suggests strong market interest.

Practical Examples

1. Scalping:

   • Use lower-order pivots on short timeframes (e.g., M5 or M15) for quick entries and exits.
   • Confirm entry with high bar strength and pivot alignment.

2. Swing Trading:

   • Focus on higher-order pivots (e.g., 4-6) to define major support or resistance zones.
   • Look for breakouts or reversals supported by volume surges.

This structured approach to using pivot points enables traders of all levels to maximize the indicator’s potential, from identifying trends to managing risk effectively.

Technical Reference Guide

Buffer Organisation

1. Bar Strength Buffer (0)
   Bits 0-23: High bar strength values
Bits 24-47: Low bar strength values

   This buffer stores Bar Strength values using a 48-bit structure split into two main parts:

   1. Bits 0-23 (lower 24 bits): Store the High Bar Strength values
   • This measures how many preceding bars (to the left) have a lower high than the current bar
   • The count stops when it encounters the first bar with a higher high
   2. Bits 24-47 (upper 24 bits): Store the Low Bar Strength values
   • This measures how many preceding bars (to the left) have a higher low than the current bar
   • The count stops when it encounters the first bar with a lower low

   So for example, if a bar has:

   • 5 preceding bars with lower highs before finding a higher high
   • 3 preceding bars with higher lows before finding a lower low

   The buffer would store:

   • 5 in bits 0-23 for the high bar strength
   • 3 in bits 24-47 for the low bar strength

   This bar strength data helps evaluate the significance of pivot points by measuring how dominant the bar’s high and low prices are compared to surrounding bars. Higher strength values indicate more significant levels.

2. Pivot Shift Buffers (1-6)

   • Structure Per Buffer:
     Bits 0-19: High pivot shift values
Bits 20-39: Low pivot shift values
   • Buffer Assignment:
     • Buffer 1: First order pivots
     • Buffer 2: Second order pivots
     • Buffer 3: Third order pivots
     • Buffer 4: Fourth order pivots
     • Buffer 5: Fifth order pivots
     • Buffer 6: Sixth order pivots