Forex Pivot Point Trading Strategy
Forex pivot point trading is what some people call “Big Dogs Trading Method“. This is because pivot point is usually used by those traders in the banks and big institutions. As these groups of people make up a large volume of the transactions, they are usually causing the movement in the price.
So what exactly is pivot point?
The pivot points are considered to be major levels of support and resistance where you are likely to see repulsion of price.
What It Consists of:
Resistance 3 (R3)
Resistance 2 (R2)
Resistance 1 (R1)
Pivot Point (PP)
Support 1 (S1)
Support 2 (S2)
Support 3 (S3)
How to Trade Pivot Points?
The pivot points can serve as a good entry and exit indicator. There are different ways you can trade with pivot point depending on the type of traders you are.
Do not worry about the calculation and the formula as there are numerous pivot calculators out there that you can use to help you calculate all the levels.
In this post today, I will go through the step on how you can set up pivot points on your chart.
Step 1: Go to your Hourly chart (Each candle represent an hour)
Step 2: Select a time that you are trading and then back date 24 hours (Example: if you are trading at 7th January 2010 7am EST, you will also need the data on the 6th January 2010 7am EST.)
Step 3: Place your cursor on the 6th January 2010 7am EST candle and record down the OPEN (O) value
Step 4: Look for the highest candle within the 6th January to 7th January and then place your cursor on the candle to record the highest (H) value
Step 5: Look for the lowest candle within the same period as step 4 and then place your cursor on the candle to record the lowest (L) value
Step 6: Place your cursor on the 7th January 2010 8am candle to record the OPEN (C) which is the closed value for the day
Step 7: Go to your pivot point calculator and then enter the OHLC value to calculate the pivot levels
In my next few posts, I will go through the various different forex strategies that you can trade using pivot points.
For more other useful forex tips, you can take a look at the forex tips section of this blog.
Below is where I learn my pivot point trading strategy from.
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