4.47 Recap – Pivot Points

Summary of Forex pivot points.
OK, as usual we give you a look in the rear-view mirror to recap what we did on pivot points and how to use those in Forex trading.
  • A pivot point is a level around which the market may ‘pivot’, i.e. turn.

  • It therefore functions as a support or resistance.

  • The standard method of calculating pivot points gives us a pivot point level and three resistance levels above it and three resistance levels below it.

  • The resistance level immediately above the pivot level (PP) is called R1, and the support level immediately below it is called S1. Market action is heavily concentrated between these lines.

  • The pivot point dynamics allow trading in the forms of ‘bounce’, ‘breakout’ or ‘sentiment’.

  • Bounce traders exploit the price bounces near levels of support and resistance represented the various pivot lines.

  • Breakout traders cash in on price moves that result in the break of an important pivot line of support or resistance.

  • Trend traders like to place trades using the sentiments indicated by the pivot line.

  • Pivot points are important to Forex traders as they are heavily watched and a lot of price activity may be expected at these levels.

  • It is always better to combine the Forex pivot point tool with other technical analysis tools such as candlesticks, RSI, moving averages and stochastic to get a more complete picture of the market before entering a trade.




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