Forex Pivot Point Trading Strategy
January 11, 2010 by Kelvin
Filed under Forex Strategies
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.)
Hourly Chart Setup
Step 3: Place your cursor on the 6th January 2010 7am EST candle and record down the OPEN (O) value
Record OPEN 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
Record HIGH 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
Record LOW 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
Record CLOSE value
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.
Other Related Posts:
Thank you for the Pivot information.
Do you have a software package which can be used to speed up the process?
I have used a daily pivot software program for several months with very
consistent results.
Hi Charles
I do not have any software to speed up the process and I am glad to hear that you are having good result from your trading.
Hi Kelvin,
You have done great job.I understood how to draw pivot lines. But, i don’t know when to enter and exit trade using this strategy. Also, which currency pair to use and at what time i have to draw pivot lines and on which timeframe i.e 1 hour. Please reply ASAP i am your fan.
Regards,
Syed
kelvin,Thnx for this great service. iwould like to know more of the indicators u use to predict the trend reversals.
Hi Mugambwa
i will try to write an article to post here to share with you guys more about the indicators that I use to predict the trend reversal.
Hi Kevin
You are simply wonderful. The best and coolest website I have ever seen that explains the concepts in simple understandable terms. Thanks a lot!
Anil
Hi Anil
Thks for visiting my site. I am really happy to know that you like my content.
Hi Kelvin,
Which 24h block are you using? In one of the courses I have learned from, the trader mentioned we can either use midnight EST or 5pm EST? Which one are you using? If you don’t mind answering?
Thank You
Eileen
Hi Eileen
For me, I usually use the midnight EST to plot my pivot point as I am trading the London Open session. However if you are trading timing like the New York Open, you can consider using the 7am EST timing to plot your pivot point.
Hi Kelvin,
Since you’re using the midnight EST, how would you calculate the Monday PP? Do you ignore the Sunday data and take the close of the Friday 5pm EST?
Thanks
Eileen
Hi Eileen
For the Monday data, I will take from Friday midnight to Monday. How do you usually do it for Monday?
Hi Kelvin,
Thank you for sharing. I’ve just started using PP. Pete Bain and John Person using different set of PP. If using John Person PP which is from 5pm EST, there’ll not be any Sunday day data problem, even daily candle is clean without Sunday candle by using NY close at 5pm EST. So I’m just wondering. Anyway Sunday data usually don’t affect the H, L and close very much. Still very much considering which set to use. Another good thing about using Pete Bain PP, you’ll not considering any trade before midnight EST and therefore avoiding the whipsaw.
Thanks again
Eileen
Hi Kelvin.
I want to thank you for your amazing contribution to the upcoming traders the world over.
On a personal note, I am really happy to have learnt and identify fakeouts from breakouts. Even other than that, your articles are very nice.
I assume that I’m only 10% done with reading all the articles on this site.
Appreciate your good work.
I hope you go a long way!
Cheers,
Gautam.
I am very glad that you are putting in the hard work to learn and do feel free to email me if you have any problems.
All the best to your trading!
HALLO DEAR FRIEND
I THANK’S MUCH FOR GIVE ME KNOLADGE IN FOREX MARKET. MY ENGLISH IS POOR SO WHAT I WRITE ? BUT IT PERFACT I THANKS . I AM IN INDIA. I INTREST IN BEST MT4 INDICATOR AND AUTOMATIC FOREX SYSTEM SO YOU HELP ME IN IT.
WITH THANK’S
YOUR SURESH
Hi Suresh
No problem and I am glad that you love what I am sharing here.
As for automatic trading, I personally do not do it and I trade manually based on my own analysis and I watch the movement of the market. Therefore I may not be able to give you any input for automatic trading.