Professional traders use pivot point for the identification of important levels of support and resistance. Simply put, the pivot point and its levels of support / resistance areas where there could be a change in the direction of prices. Pivot lines are particularly useful for (short-term) traders who want to take advantage of small price changes. They can be very useful since many currency pairs usually vary between these levels. Pivot lines can be used by traders who trade in a range (range-bound), as well as traders wait for breaking markets (breakout). When trading in a range trader uses the pivot point for the identification of trades, and thereby placed an order for purchase near the line support, and an order for sale near the line of resistance. When punching markets pivot lines are used to identify key levels that need to break through to the movement of prices classify as a real breakthrough. Each day, the market which follow a price of opening, closing, highest price and the lowest price for the day. These are the basic information required to calculate the pivot level. The reason why the pivot levels so popular is that they are predictable and not “lagging” indicator. We use the information from the previous day to calculate potential levels at which the price will change its direction in the day when we trade. Since many traders monitored pivot levels, and the market usually reacts to the same. This gives you the possibility for successful trading.
Before I explain calculating pivot levels, draw your attention to the various sites you can find calculators to pivot levels or already calculated levels for the day. Pivot lines used by professional traders for determining entry and exit from the position on the basis of the trading activities of the previous day. This technique is best used after taking the direction of the trend. This allows you to see possible areas for which it is believed that it could cause the price movements.When you learn to use the pivot point and with the use of other tools of technical analysis, the greater the likelihood of your success! Pivot lines and joint support and resistance levels are calculated using the last period and the last price at which the open, high, low, and closing prices.
Here are the calculations for the pivot point:
Pivot lines (PP) = (High + Low + Close) / 3
Support and resistance levels are then calculated from the pivot line. The first level of support
(support) and resistance (resistance):
The first support (S1) = (2 * PP) – high
The first resistance (R1) = (2 * PP) – Low
The second level support and resistance:
Other support (S2) = PP – (high – low)
The second resistance (R2) = PP + (high – low)
Do not worry, do not you have to perform these calculations. Your software will automatically do it all for you and draw them on the chart. Also, keep in mind that some programs provide additional pivot point as the third level of support and resistance, and medium level or intermediate degree (level between the main pivot line and the level of support and resistance). Pivot line should be the first place to look when you open position, since it is the primary level of support / resistance. The biggest price movements usually occurs on the pivot lines. Only when price reaches the pivot line, you will be able to determine whether to go long (buy) or short (sell) position, and ask the profit and loss. Generally, if the price is above the pivot it is considered bullish (bullish), and if it is considered that below is bear (bearish). Let’s say the price is hovering around the pivot point and closes below it so you decide to sell. Your stop loss (SL) would be above the line (PP) and initial profit target would be S1 (first line support). The same is applicable to the upward trend. Power support and resistance at different pivot levels is determined by the number of times the price bounces off the pivot.
The more times a currency pair touches a pivot level then reverses, the level becomes stronger. Pivoting simply means reaching the level of support or resistance, then return back. If the pair is approaching the upper level of resistance, you can sell it and set a protective stop loss (SL) immediately above the level of resistance. If the pair continues to move upwards and dash above the level of resistance, it would be considered in ascending ‘ breakthrough ‘. The above default short position will be closed (SL), but if you believe that a breakthrough has strong buying power, you can come in again, but this time in a long position. In this case, you can set a protective stop loss (SL) immediately above the first level of resistance, which has just broken and now acts as support. If the pair closer to the lower level of support, you can buy a pair and set a stop loss below the level of support.
In theory it sounds quite simple, but trust is not all that great. In the real world, pivot lines do not always work. Price is prone to ” spin ” around the pivot point and it’s very hard to say what to do next. Sometimes the price will stop immediately to the pivot point, and then they will turn your target profit will not be reached. The second time, it will look as if the pivot line strong level of support, you enter a purchasing position, but the price will fall exactly so that you close the trade (SL) and return back in your direction. You must be very selective and create a trading strategy using pivot lines which will have to be strictly observed.
- If the price of the PP, expect a move to R1 or S1
- If the price is at R1, expect a move to R2 or back towards PP
- If the price is at S1, expect a move to S2 or back towards PP
- If the price is at R2, expect a move to R3 or back towards R1
- If the price of the S2, expect a move to S3 or back towards S1
- If there is no significant impact of the news on the market, price will usually move from P to S1 or R1
- If there is a significant impact of the news on the market, prices will go through R1 or S1 and reach the R2 or S2 and even R3 or S3
- R3 and S3 are a good indication for the maximum range during volatile days, but occasionally may be exceeded
- Pivot lines work well in ‘undecided’ ‘(sideways) markets since prices will likely be in the range between the R1 and S1 lines
- In addition to a strong trend, price will fly through the pivot point and continue to move on.
It can see three levels of support and three levels of resistance. It is included pivot points. Pivot points is between 1.07950 and 1.09550. It represents daily range trading for this currency pair. It is 160 pips. We can see that 1.09550 resistance. Price did not break this level resistance. It was one time to break the next resistance at 1.10500 but candle was closed below this level. It was sign that price can’t be broken. Is is related also on support line. It didn’t break support line at 1.07950.It can be said that pivot points trading is good for forex trading. It is current price 1.08800. If price breaks below 1.07950 it continued to drop to 1.07500 and 1.06900 in extension. It is signal for short trading strategy. If price will be broken 1.09550 it will be risen to 1.10500 and 1.11500 as targets.
Supports and resistances levels
1.11150 resistance
1.10500 resistance
1.09550 resistance
1.08800 pivot points
1.07950 support
1.07500 support
1.06900 support
Pivot Points Conclusion
It shows how to use pivot points for binary forex trading. Traders use pivot points to identify important support and resistance levels. These are the levels at which there could be a change in the direction of price movement. Pivot points are used for short-term forex trading Pivot points can be used when the expected penetration resistance as an example in this case. When trading in a range without using pivot sets the input position to buy deep. If prices break through resistance levels then one can expect a further rise in the price to the next line of resistance. This technique is best used after you determine the direction of the trend. This allows you to see possible areas where it is believed that it could cause the price movements. We know the direction of the trend. It is strong bullish trend. It means that the price will rise. It is long trading. It is easy to draw your own support and resistance level for any asset.