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A Nifty Pivot Point Calculator is a tool used by traders in the Indian stock market to analyze potential support and resistance levels for the Nifty 50 index, a benchmark index for Indian equities. It does this by calculating various pivot points based on the previous day's trading data (high, low, and close).
Here's how it works:
Input: You enter the previous day's high, low, and closing prices for the Nifty 50 index into the calculator.
Calculation: The calculator then uses specific formulas (depending on the chosen pivot point method) to calculate various pivot points, typically including:
Pivot Point (P): The average of the previous day's high, low, and close prices.
Support Levels (S1, S2, S3): Levels below the pivot point that are calculated based on a percentage of the previous day's trading range.
Resistance Levels (R1, R2, R3): Levels above the pivot point that are also calculated based on a percentage of the previous day's trading range.
Interpretation: Traders then use these pivot points to identify potential areas where the Nifty 50 may find support or resistance during the current trading session. For example, if the Nifty 50 price falls below the S1 support level, it may indicate that there is selling pressure and the index could continue to decline. Conversely, if the Nifty 50 price rises above the R1 resistance level, it may signal that there is buying pressure and the index could continue to climb.
Here are some of the popular Nifty Pivot Point methods:
Classic Pivot Point: This is the most basic method and uses simple formulas to calculate the pivot points.
Woodie's Pivot Points: This method adds Fibonacci retracement levels to the classic pivot points for more precise support and resistance levels.
Camarilla Pivot Points: This method uses a more complex formula that takes into account the volatility of the market.
DeMark's Pivot Points: This method uses Fibonacci ratios and pivot points to identify potential turning points in the market.
It's important to note that Nifty Pivot Points are not foolproof indicators and should not be used as the sole basis for making trading decisions. They are best used in conjunction with other technical and fundamental analysis tools.
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