Many of you have heard of pivot points and may use pivot points in your trading. I wanted to go over a possible way for you to use them in day trading. Below you will see a Dow Mini futures 5 min chart with that days pivot points plotted on the chart. There are a couple of various formulas to compute the pivot point numbers but the standard formula is as follows:

Resistance 3 = High + 2*(Pivot - Low)
Resistance 2 = Pivot + (R1 - S1)
Resistance 1 = 2 * Pivot - Low
Pivot Point = ( High + Close + Low )/3
Support 1 = 2 * Pivot - High
Support 2 = Pivot - (R1 - S1)
Support 3 = Low - 2*(High - Pivot)

Once you have calculated your pivot points your ready to use them. You may have heard other ways to apply pivot points to your trading but I would like to show you how pivot points have helped me on any given trading day. This is a list of trade set-ups I will take using pivot points:

- On an open at or near a pivot point I will stay on the side lines for a clear break in direction

-On an open in between two pivot points I will Fade the first test of a pivot point

-On the first solid break of a pivot point I will Buy/Sell the first pullback to that same pivot point

-On the third test of a pivot point I will go with the move in anticipation of a break

-typical stops are set a few points from the pivot point

-typical exits are half the distance to the next pivot point and the complete distance to the next pivot point

Below is a 5 min Dow futures chart with trade set ups noted. As you can see, on a day that has alot of movement this simple set-up can be very profitable. For any questions visit the tradersbase.com forum