How to speculate on foreign exchange with pivot points, how to use pivot points for forex trading

Forex pivot points are points used to identify important support and resistance levels in a market** trend. Forex pivot points are particularly useful for traders and can be used to determine prices during small fluctuations in the market.

The formula for calculating the Forex Pivot Point is as follows:

Pivot Point (pp) = (high+low+close) 3 In the Pivot Point trading method of foreign exchange trading, the main reference indicator of the Pivot Point is the fluctuation trend of the exchange rate on the previous working day. Traders can use the Pivot Point as an important basis for judging their exit and entry points, and it is best for traders to use Pivot Points in combination with the trend of the exchange rate. In addition, in many cases, the pair moves back and forth between pivot points.

Therefore, the Pivot Point can be an important parameter for judging the range of exchange rate fluctuations.

In specific foreign exchange trading, if a trader uses the pivot point trading method of foreign exchange trading to trade, he can first roughly determine the range of exchange rate fluctuations, and then open a position near the support level and close the position near the resistance level. If a trader wants to speculate on a breakout, they can also use the pivot point to determine the possible breakout point of the market trend.

Pivot point trading is one of the more commonly used trading techniques by foreign exchange traders, because it is simple and convenient, and is often directly put into the process of analysis and judgment by traders. **Medium-important support and resistance points are generally distributed on specific pivot points, and the probability of the exchange rate hitting the pivot point is displayed in the form of probability, during which the exchange rate will generally fluctuate up and down. Investors can change the direction according to the probability relationship, so as to find the breakthrough point in the first place.

Determination of the pivot point.

The pivot point, support point and resistance level are calculated based on the opening price of the previous trading cycle, and the specific calculation method is as follows:

Pivot point (pp) = (high + low + close) 3

The first support level? (s1) = (2 * pp) –high

The first resistance level? (r1) = (2 * pp) –low

Second support level? (s2) = pp – high – low)

The second resistance level? (r2) = pp + high – low)

Tips for applying pivot points.

When the pair touches the pivot point PP, you can wait for the pair to return to the support level S1 or resistance level R1; When the pair touches R1, wait for the pair to return to the Pivot Point PP or R2; When the pair reaches S1, wait for the pair to return to S2 or the Pivot Point PP; And so on.

If there is no significant fluctuation in the exchange rate, the pair will usually fluctuate between S1 and R1, and will break through the S2, R2 and other positions if it is more intense, and even break through the S3 and R3 levels.

Pivot point trading is relatively simple and convenient to apply, and does not require too much analysis and judgment, so it is more suitable for novices. Using pivot points to determine support and resistance points can make your analysis more accurate and profitable. You can also use it in conjunction with other technical indicators.

In the forex market we often see or hear support or resistance points, so how do you calculate these support and resistance points? We can calculate it in terms of pivot point.

The pivot point is often used as a technical parameter. Although a complete trading book includes many mathematical equations and technical indicators, such as separations, parabolas, etc., the pivot point is still an important and commonly used method of analyzing financial markets.

How to apply pivot points

There are many forms of calculation of pivot points, the most common one using 5 key points, including pivot point, support 1, resistance 1, support 2, resistance 2. You can even use more support and resistance points, such as support 3 and resistance 3.

p (pivot point) =3

R1 (Resistance 1) = P (Pivot Point) x 2 - L (Low).

s1 (support point 1) = p (pivot point) x 2 - h (most**).

r2 (resistance point 2) = p (pivot point) +

s2 (support point 2) = p (pivot point) -

r3 (resistance point 3) = h (most**) + 2*

s3 (support point 3) =l (low) -2*

s represents the support point, r represents the resistance point, p represents the pivot point, h represents the lowest price of the previous period, l represents the lowest price of the previous period, and c represents the ** price of the previous period.

If ** is near PP, pay attention to its movement towards R1 or S1. If ** is near R1, it can be expected to move towards R2 or ** to pp

If ** is near S1, it can be expected to move towards S2 or ** to pp

If ** is near r2, it can be expected to move towards r3 or ** to r1

If it is near S2, it can be expected to move towards S3 to S1

If there is no important news affecting the market at the moment, then it will usually move between S1 and R1.

If there is currently an important news impression market, then ** may directly pass through R1 or S1, reach R2, S2, or even R3, S3 can be seen as the maximum range of single-day floating, but occasionally it will be broken.

Pivot lines work well in the market because they are usually between R1 and S1.

In a relatively strong trend, the market will directly break through the pivot line and continue to move forward. Pivot point is a technique based on the previous trading day** and is often used by professional traders and market makers in day trading to determine entry and exit points. It is advisable to trade with the Pivot Point after confirming the trend of the day.

It turns out that most currency pairs fluctuate between pivot points, which is why pivot points become very effective in forex trading. Range traders usually place buy orders near support levels and sell orders near resistance levels. Breakout traders usually refer to the pivot point to confirm a possible breakout.

The use of the pivot point is very simple and has a wide range of applications. Use Pivot Points in conjunction with other technical indicators such as candlestick patterns, MACD crossovers, moving flat crossovers, oscillators, and many more. The more simultaneous confirmation signals, the better the chances of making money!

The Pivot Point is the most common support line, so many traders will trade with the Pivot Point. The market will often move out of a relatively large ** near the pivot point. When the pivot point is reached, you can determine whether to go long or short, and set the corresponding take profit and stop loss.

Typically, the market is bullish when it is above the Pivot Line; Bearish when below the Pivot Line.

Let's say the market is near the Pivot Point and ends up closing below the Pivot Point, so you decide to go short, stop loss at the Pivot point, and take profit at the first support level S1Of course, if the market** falls below S1 and continues to decline, you can move your stop loss down between PP and S1 and continue to watch. In general, the second support line S2 should be the lowest point of the day, which is your ultimate profit target.

Conversely, if ** closes above the Pivot Line PP, you can consider opening a long position, setting the stop loss below PP, and using the upper lines R1 and R2 as your profit target. The strength of support and resistance levels is determined by the number of times the market is in its vicinity. The more times a support or resistance level is touched, the stronger the support and resistance at that level.

If the market is approaching the upper resistance level, then a sell order can be placed and the stop loss can be set above the resistance level. If ** continues to rise and breaks through the resistance level, then a "breakout" is formedIf you confirm that the uptrend is strong, you can also take a long position on the reverse hand and set the stop loss below the resistance level that has just been breached.

In theory, the Pivot Point trading method seems perfect, doesn't it? no!

In the real world, pivot points don't always work. The market tends to persist near the pivot point, so much so that it's hard to say exactly which direction it's heading.

Sometimes, the ** reverses before the Pivot Line is reached, and as a result, the set take-profit target is not reached. Other times, it is obvious that the support of the pivot point is very strong, you place a buy order, but it continues**, after falling below your stop loss**, continue as you expect**.

Look at the orange part on the far left. The support strength of pp is very strong, and it has held the market twice, but when you place a long order, ** has fallen below pp

Looking at the first purple part next to the orange part, **to** broke PP, and before reaching the first support level S1, it reversed and broke through PPIn the second purple section, ** broke down PP for the second time, reaching S1 Hu ** back PP

Looking at the pink part, PP once again played the role of support, but ** still failed to reach the first resistance level S1

In the next yellow section, ** goes down again, passes S1 without a hitch and goes straight to S2

If you try to go long during this timeframe, the consequences can be imagined....

Pivot points are a fairly simple tool. Unless you have been exposed to forex or the ** market, you have not been able to encounter it before. The price levels it utilizes are easy to calculate, and for many years it has been the most popular rough reference for floor traders and institutional forex traders, so learning about forex should not be overlooked.

To put it simply, Pivot Points utilize the highs, lows, and prices of the previous trading day to calculate the 5 potential intraday support or resistance for market activity on the current trading day. Assuming you know the highs, lows, and prices of the previous trading day, you can calculate the aforementioned 5 levels.

Let's show how to figure it out.

Previous trading day's high = h

Previous trading day's low = l

Previous trading day** price = c

The first level to be calculated is the Pivot Point, which is located in the middle of the other four levels, with two support and resistance levels above and below them.

Pivot point = (h+l+c) 3

Resistance 1=(2 pivot points)-l

Support 1=(2 pivot points)-h

Resistance 2 = pivot point + (h-l).

Support 2 = Pivot Point - (h - l).

If you are familiar with this instrument from the ** market, then you may be accustomed to calculating the pivot point in a slightly different original way than the aforementioned one, which consists of taking the "opening price" of the current trading day and dividing the result by 4.

However, in the forex market, the opening price of the current trading day is actually generally the same as the ** price of the previous trading day, so the original algorithm is of little significance. It's also important to note that there are no strict rules for how to calculate pivot points, so you may want to experiment with different combinations to see which one works best.

Let's look at an example. 'If we find that the previous day's EURUSD had a high of 40 and a low of 50 and a price of 10, then the pivot point should be:

Pivot points = ( 40 + 50 + 10) 3 = 70

Resistance 1 = (2 70) -50 = 90

Support 1= (70) -00

Resistance 2 = 70 + (40 - 50) = 60

Support 2 = 70 - 40 - 50) = 80

The above 5 **s can be reflected in the intraday chart of the day with horizontal lines - such as the 30-minute chart.

When the market approaches these levels, the pair acts as resistance if it moves from the bottom up, and support if it moves from the top down. Unless there is a sharp move in the first few hours of the current trading day, it is possible to start the market from the level between the two levels of support 1 and resistance 1.

Of course, sometimes the market quickly departs from the pivot point calculated from the previous trading day, and then these positions will not be of much use to you. More often than not, however, the market does look to be influenced by the expected pivot point. If you have been preparing for a particular currency pair and you notice that the market is approaching the first resistance level, then you may want to delay the entry a bit.