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Technical Analysis  Technical Indicators  Trends Indicators  Pivot Points Support and Resistance Lines

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## Pivot Points Support and Resistance Lines (PP)

Pivot Points Support and Resistance Lines, PP indicate the average price and potential lines of support and resistance in a certain time space. We get current values of the indicator from data received at the previous period.

Very often PP is based on day, week and month periods. The plot period must differ from the indicator period by one time at least. Otherwise, if they coincide, the indicator line will look like a dot and will carry no information. For example, if a PP indicator is laid on a day plot, then by each trade day bar you will see dots instead of lines. And if the indicator period is less than the plot period, you will not see the values at all.

When you analyze the market situation, it is recommended to use several PP indicators based on week, month and year periods. If two or more levels coincide, they intensity each other. Before taking a long or a short position, you should wait until the price crosses all coinciding levels. Before this, you should not open any positions.

Support and resistance levels, received with the help of the indicator, allow predicting possible levels of Stop Loss and Take Profit with high precision.

The following rules are also just:

• If the PP is next to the opening price of the currant bar, the probability of getting profit is higher;

• On a growing market, when a price drops below the central axis, you should not open a short position immediately as a side trend as possible. Most probably, the price will re-test the level. If the market will not be able to overcome, the turning point, we may speak about a market turn. This thesis is right for the "bear" trend.

To hold long-term trade, you must know the location of week, month and year timeframe central axis. It is obvious that if the price is lower than those turn lines, we may speak about a strong descending trend. On the other hand, if the price is higher than the week, month and year central axes, it is a glaring example of a bullish trend.

## Calculation:

`PP = (HIGH + LOW + CLOSE) / 3R1 = 2 * PP - LOWR2 = PP + HIGH - LOWR3 = 2 * PP + HIGH - 2 * LOW`

`S1 = 2 * PP - HIGHS2 = PP + LOW - HIGHS3 = 2 * PP + LOW - 2 * HIGH`

Where:
PP — the central axis (any price can perform as it);
R1, R2, R3 — the 1st, 2nd and 3rd levels of resistance;
S1, S2, S3 — the 1st, 2nd and 3rd levels of support;
HIGH — the max price in the previous period of the indicator;
LOW — the min price in the previous period of indicator;
CLOSE — the closing price in the previous period of indicator.

## Source Code

Full MQL4 source of RSI is available in the Code Base: Pivot Points Support and Resistance Lines (PP)
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