Pivot Point Trading

[mark04]

Pivot Point Trading

Using pivot points as a trading strategy has been around for a long time. This was a nice simple way for traders to have some idea of where the market was heading during the course of the day with only a few simple calculations.

The pivot point is the level at which the market direction changes for the day. Using some simple arithmetic and the previous days high, low and close, a series of points are derived. These points can be critical support and resistance levels. The pivot level and levels calculated from that are collectively known as pivot levels.

Every day the market you are following has an open, high, low and a close for the day. This information basically contains all the data you need to calculate the pivot levels. The reason pivot points are so popular is that they are predictive as opposed to lagging. You use the information of the previous day to calculate potential turning points for the day you are about to trade (present day).

Because so many traders follow pivot points you will often find that the market reacts at these levels. This gives you an opportunity to trade.

If the market opens above the pivot point then the bias for the day is for long trades as long as price remains above the pivot point. If the market opens below the pivot point then the bias for the day is for short trades as long as the market remains below the pivot point.

The three most important pivot points are R1, S1 and the actual pivot point. The general idea behind trading pivot points is to look for a reversal or break of R1 or S1. By the time the market reaches R2,R3 or S2,S3 the market will already be overbought or oversold and these levels should be used for exits rather than entries.

A perfect set up would be for the market to open above the pivot level and then stall slightly at R1 then go on to R2. You would enter on a break of R1 with a target of R2 and if the market was really strong close half at R2 and target R3 with the remainder of your position.


Best Regards
Mark

 

[ProfitMaximizer101]

You may have heard that one of the best tools in the Forex trading toolbox is a pivot calculator. Pivot points are one of the more commonly used triggers for trading systems. If you’re new to the Forex market, though, you may be unsure of what pivot points are and what they can mean to your trading.

To keep it simple, pivot points are just what it sounds like, the exact point that the market is expected to turn negative or positive. If the market or a specific currency has been going down, the pivot point is the precise moment or "point" that it will reverse itself and begin to climb. If a currency or the market as a whole has been on the rise, the pivot is the exact moment and "point" that it will reverse and turn downward.

Having the knowledge or predicting significant movements in the Forex exchange markets is a coveted talent, it can make people extremely wealthy. The pivot point and being able to correctly identify it is one of the closest ways to claim this attribute.