Another Pivot Point Trade in Addition to Two Non-traditional Ones (33 ITM)

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Demo Account!
    Free Trading Education!
    Sign-up Bonus!

  • Binomo
    Binomo

    Trustful Broker!

Pivot point trading strategies

We look at the pivot point indicator, and how it can be used in trading.

What are pivot points?

Pivot points have a long history in trading, and are a commonly used technique to this day. They are used to identify market movements, based on the high, low and closing price of the previous day. If the market in the next session trades above the pivot point this is seen to be bullish, whereas if the market trades below the pivot point it is seen to be bearish.

Pivot points can help determine the direction of movement for a market within the context of a broader trend. Essentially, they are another form of support and resistance, with traders attempting to identify where prices may find support after falling, or run into resistance after rising.

How are pivot points calculated?

The usual system used is the five-point system. This uses the previous high, low and close, and then also employs two extra support levels and two additional resistance levels to provide five pivot points. This is calculated in the following way:

Pivot point (P) = (previous high + previous low + previous close) / 3

Support 1 (S1) = (pivot point x 2) – previous high

Support 2 (S2) = pivot point – (previous high — previous low)

Resistance 1 (R1) = (pivot point x 2) — previous low

Resistance 2 (R2) = pivot point + (previous high — previous low)

Like all other indicators, there are other ways of calculating pivot points, but the above is the standard method. Pivot Points can be added on to a chart in the IG platform by selecting the indicator drop down menu and choosing ‘pivot points’ or by right-clicking to select them. Instead of using daily pivot points, a trader can also use weekly data, useful for longer-term trading.

Pivot point trading strategies

Pivot points can be used to identify the overall trend, since a move through pivot points to the upside indicates an uptrend. Meanwhile the opposite, where a price continues to fall below pivot points during a session, is indicative of a downtrend. It is not a foolproof system, but like the use of basic support and resistance, the system tries to use previous important levels to derive others that may be worth watching. Some sessions will see the price adhere to pivot points in an impressive way, while other days the price will simply disregard these levels.

Candlestick pivot point strategy

Pivot points can be used with any type of chart, but it is most useful with candlestick charts. This allows you to see price action more effectively. An example can be seen below. In this hourly chart of AUD/USD, the price moved above the central pivot point, but then fell back below it and posted an hourly close below it. This could provide a possible short position, indicating that the price cannot hold support around the daily pivot.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Demo Account!
    Free Trading Education!
    Sign-up Bonus!

  • Binomo
    Binomo

    Trustful Broker!

Active Trading Tips: How to Use Pivot Points to Trade

Pivot points have been mentioned in some of our earlier blog posts, but in this article, we want to add some meat to the bones by explaining to traders and readers of this blog what pivot points really are and how they can be utilized.
Pivot points can be described as indicators which are essentially based on price action, and which help a trader find “key price levels” in the market at which the price of an asset has the potential to either reverse fully, or consolidate before experiencing a breakout. These key price levels can then be used as areas where there trade entries and exits can be performed with a reasonable amount of success.

What Is A Pivot Point?
A pivot point is essentially a key price level of support or resistance. There are usually several pivot points, and they are calculated using the high, low, and close prices of a given time frame. The commonest form of pivot points are those calculated with the previous day’s values. After calculation, the trader is given 7 key price levels which constitute the price pivots. The seven key price levels are as follows:

  • Three areas of support: S1, S2, S3
  • Three areas of resistance: R1, R2 and R3.
  • A neutral price level which could function as a support or resistance: the central pivot or daily pivot.

We could also have weekly and monthly pivots, but these are only useful for long term traders.
Previously, the only way to calculate these pivot points was to keep calculating these key price levels manually every new trading day using the previous day’s high, low and close prices. This was very cumbersome and it was not unusual to see many traders get tired of the dreariness of constant calculations of these pivot points. I personally got very tired of calculating these pivot points day in day out. However, things have changed. There are now software that have been programmed with a special algorithm that enables them take the previous day’s high, low and close prices and calculate fresh pivot points for every new day, and plot them on the forex charts automatically, thus eliminating the need for manual calculations. These software are known as automatic pivot point calculators. There are several free versions all over the internet and a scan of the search engines will reveal at least one suitable one that the trader can use.

How to Derive Pivot Points and Attach Them to Your Charts

The calculation of the pivot points is based on the high, low, and closing prices of the previous day’s price action. The formula is as follows:

P= (H+L+C)/3= pivot point

Nowadays, the formula is simply used to give traders theoretical knowledge of how to manually calculate pivot point levels. These days, it saves time and effort by simply using the automatic pivot point calculators. On the MT4 platform, the automatic pivot point calculator has to be placed in the custom indicator folder after download, then attached to the chart to be analyzed. The pivot points will then appear as dotted lines with different colors. Usually the support lines are shown in green and the resistance lines shown in red. When these pivot points are plotted on the chart, the colored lines provide for immediate visual recognition of these levels of support and resistance. These levels tend to hold in the market because they are watched and respected by the millions of forex traders on the retail and institutional side of trades. They can therefore be used as a strong basis for setting trade entries and exit points.

Pivot Point Trading Strategy

Why are pivot points important in forex trading, especially for intraday traders? Pivot points are an indication of the market bias for the day.

Once the day’s market bias has been identified and some sort of short term trend has been established along this line, the movement of the price is likely to be halted at the next pivot level, or the price may temporarily take a breather as it tests that key price level repeatedly. If the bias for the market is strong enough, that key level will eventually be broken. Traders can thus use the next key level in the line of the trend as an area where profit targets for the trade can be set, and then use the key price level opposite to this line of movement as an area to define the stop loss level.

In an uptrend therefore, it is possible for the stop loss and profit targets to be set as follows depending on where the price has taken off from. If entry was made at S2 in a market with bullish bias, then the next key level is at S1 (acting as resistance). Profit target can be set there. If the price breaks through S1, then the next target is the central pivot. If the price breaks through that level as well, then next target is at R1. In all these instances, since entry was made at S2, the stop loss must be set below S2 so that even if price retreats against the trade position, the S2 support can shield it away from the stop loss. This is the principle used in setting stops in a uptrend using pivot points. Use the next key level above price as profit target, and use a price point between the key level where trade was initiated and the one below it as entry point.

In a market with a bearish bias, entries made at R3 for instance will have R2 as profit target. If the price breaks through R2, then R1 becomes the next profit target, in that order. The next profit target is the lower key price level, but if that level is broken by the candle, then the one below it becomes the next profit target. In setting a stop loss, the stop loss level is set above the key level from where the trade entry was made. This way, if the price action goes against the trader’s short position, the key price level from point of trade entry will most likely shield the stop loss from being triggered.

A demonstration of what has just been described above is seen on this chart below:

Our reference point starts from the bullish pinbar which opened above the central pivot, conferring a bullish bias for the day in question. The entry is made at the low of the next candle, which appropriately bounced off the central pivot. A stop loss should therefore be set between central pivot and S1. The price moved upwards in tandem with the bullish market bias, and instead of closing at R1 which is the next logical profit target, the reference candle broke above it, opening the way for R2 to become the next profit target. The price failed to break R2; it merely tested it, confirming R2 as the profit target. This is where the trader who made the entry at the central pivot should exit the trade.

Next, we see the price make a brief retracement to R1, where another pinbar formed, confirming that another trade entry on the bullish side could be made here. The re-entry trade candle broke through R2, opening the way for R3 as the profit target. The appropriate stop loss ought to be set between R1 and central pivot.

Having hit R3 as solid resistance, the bias for trade changed to a bearish one, providing impetus for the short trade commenced at R3 which failed to break R2. R2 would therefore be the profit target, with stop loss set at above R3. After R2 was tested multiple times as a support, it eventually gave way. The trade is therefore made at the next candle which pulled back from breakout candle’s low to R2. The stop loss would be set at between R2 and R3. This new move broke through R1 and ended at central pivot, making the central pivot the next target for the trade.

The price retreated back to R2, which resisted any further bullish retracement. This would mark the point of another short trade entry, using a stop loss set between R2 and R3. This new bearish move was a very strong one, tearing through R1, central pivot and S1. The move eventually failed to break S2, and this would mark the new trade profit target.

Study this chart very well to understand the principles of pivot point trading. Watch the pattern and behaviour of thecandlesticks at these key price levels. We see the pinbars that provided bullish trade entry signals. We also see the pinbars at R3 and R2 which provided indications that these levels were good areas to go short. Breakout candles show the way to the next key levels as profit targets, enabling traders to extend their profitable runs.

When you get it right, pivot points can then be incorporated into your trade strategy arsenal.

How to Use Pivot Points in Forex Trading

By Tyson Clayton

Pivot points are a very popular way to gauge the bullish and bearish sentiment in the forex market. They were first developed by commodity traders to identify possible turning points (support and resistance lines), and have shown to be a very effective trading tool in liquid markets like forex.

In addition, pivot points are calculated in an objective way, without any interference of the trader himself, compared to Fibonacci levels for example, where the trader needs to spot the swing highs and lows in order to draw the Fibonacci retracements.

This article will show you what pivot points are, how they’re calculated, and most importantly – how to use them in an effective way in your daily trading.

Video: Using Pivot Points in Forex Trading

Sign up for the Webinar Here!

What are Pivot Points?

Pivot points are used to identify possible support and resistance levels. The forex market, especially the most liquid pairs, have proved to work exceptionally well with pivot points. Forex traders use pivot points for entry and exit targets, and to objectively assess the risk of a trade as they can also be used to set stop-loss levels.

Let’s take a look on the next chart, which shows pivot points applied to the EUR/USD currency pair.

As you can see, pivot points consist of seven lines in total: the daily pivot (PP), the daily support 1, daily support 2, and daily support 3 lines below the daily pivot, and the daily resistance 1, daily resistance 2 and daily resistance 3 lines above the daily pivot.

Note that the support and resistance lines work the same way as traditional horizontal support and resistance lines. When the price approaches one of the support levels, there is a high probability that it will bounce and reverse – and the same applies to the resistance levels. However, once a support or resistance line breaks, it will change its nature and become a resistance or support line, respectively.

This is an additional reason why pivot points work so well in the forex market, as the high liquidity ensures the absence of any type of market manipulation and technical support and resistance levels tend to be respected by market participants around the world – to such an extent that they become almost self-fulfilling.

How to Calculate Pivot Points Calculation

Pivot points are calculated based on the previous day’s high, low and close prices. Once all pivot points are calculated, they remain valid for the current trading day and can be displayed and traded on across all timeframes.

For example, the 30-minutes time frame (as in the example above) includes 48 candles, while the 4-hour timeframe includes six candles that relate to the current day’s pivot points.

The first step is to calculate the daily pivot points, using the formula below:

Daily Pivot Point = [High (previous day) + Low (previous day) + Close (previous day)] / 3

This pivot point is the used to calculate the remaining support and resistance levels for the current trading day:

Resistance 1 = (2 x Pivot Point) – Low (previous period)

Support 1 = (2 x Pivot Point) – High (previous period)

Resistance 2 = (Pivot Point – Support 1) + Resistance 1

Support 2 = Pivot Point – (Resistance 1 – Support 1)

Resistance 3 = (Pivot Point – Support 2) + Resistance 2

Support 3 = Pivot Point – (Resistance 2 – Support 2)

Please note that some trading platforms use a different way to calculate the Resistance 3 and Support 3 levels, which is shown below:

Resistance 3 = High (previous period) + 2 x (Pivot Point – Low (previous period))

Support 3 = Low (previous period) – 2 x (High (previous period) – Pivot Point)

Of course, you don’t have to calculate these levels by yourself, as all popular trading platforms already have pivot points in their list of technical indicators.

How to Use Pivot Points in Trading

Let’s get to the interesting part – how can you use pivot points in trading? Well, the first thing you should analyze is the current market condition. Is the market ranging or trending? Depending on this, you will use pivot points either to trade bounces or to trade breakouts out of the pivot points. Basically, as we already said, pivot points act as normal support and resistance lines and are used to identify possible turning points in the market.

Traders use pivot points the same way as they’d use traditional support and resistance levels. This means, when the price approaches a resistance level, a sell opportunity arises. And when the price approaches a support level, a buy opportunity arises. Let’s take a look at the following chart, which shows a 1-hour chart of EUR/USD.

At point (1), the price reached the Support 3 pivot point, which is a strong signal that we could see a reversal. It creates a buying opportunity, with a stop-loss just below the Support 3 level.

Point (2) marks the price at the Resistance 3 level, which again creates a selling opportunity with a stop-loss above the R3 level. The price bounced off the R3 level and went all the way down to the S1 level (Point 3), which is also our profit-taking level. Remember to look for additional confirming signals and don’t rely only on pivot points. As you can see at point (3), a hammer pattern formed which signals that the price might reverse again. Again, we could enter here with a buy order and put the stop-loss just below the S1 level.

Point (4) is our exit target and simultaneously opens the possibility to enter with a sell order. The pinbar briefly touched the Resistance 2 level and reversed to make a new swing low. With the break of the daily pivot at point (5), we could enter with a buy order and look to exit at the next day’s Support 1 level.

Conclusion

Pivot points are an effective tool to analyze and identify possible turning points in the market. Once all pivot points are calculated for the current day, they remain valid throughout the trading day and can be traded on different timeframes. You can use pivot points the same way as you’d use traditional support and resistance lines, and trade both the bounces and breakouts depending on whether the market is ranging or trending.

Конкурс статей CLOSED

Ежемесячный призовой фонд

Конкурс статей – это уникальное соревнование для людей, интересующихся рынком Forex и желающих попробовать себя в написании статей.

4-й . 5-й место USD

6-й . 10-й место USD

См. все Видео

См. все Последние новости

Article Contest results for August are announced

We have just published the results. Please visit the results page to see who won.

Статьи

мертвая петля или как написать робота на Visual Jforex

  1. Почему – Итак это последний месяц конкурса, и все ринулись писать статьи. К сожалению компания решила прикрыть много кункурсов, согласен. Мы не оправдали их надежд. В Бинарах все лупят нахаляву, порой у победителей смотришь стайтмент а там. -1000% профита ))) а то и более, просто человек на удачу изо дня в день, пытался разогнать свой счет. то есть даблил-удваивал удачу. Если посмотреть то всего для победы нужна серия из 6 побед 1-2-4-8-12-16. Я все мечтал победить но увы. Теперь на реальные деньги страшнее. Конкурс статей в массе писатей пишут ни о чем. Технический анализ просто нужна удача и по возможности максимальное количество прогнозов. Тоже лотерея.

Мы не можем определить ваш разговорный язык, поскольку вы не вошли в систему, но предполагаем, что это Русский
Пожалуйста, войдите в систему или выберите другой язык для перевода.

Вход – или – Перевести на:

Ваш разговорный язык был успешно изменен на

amazing article , it contains a useful information

Робот не законченный, а где трейлинг-стоп ? А так работа в безубыток ?!

What Success Looks like?

Мы не можем определить ваш разговорный язык, поскольку вы не вошли в систему, но предполагаем, что это Русский
Пожалуйста, войдите в систему или выберите другой язык для перевода.

Вход – или – Перевести на:

Ваш разговорный язык был успешно изменен на

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Demo Account!
    Free Trading Education!
    Sign-up Bonus!

  • Binomo
    Binomo

    Trustful Broker!

Like this post? Please share to your friends:
Binary Options Wiki
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: