Forex Trading using Pivot Points

Pivot points are the simple yet powerful technical analysis tools extensively followed by forex traders. Click here to know more about Pivot Points. Pivot points are useful for all types of traders – range-bound traders, trend traders and breakout traders – trading for long-term and short-term profits.

In forex market, it is a common practice to derive pivot points from daily charts and apply them to intraday (hourly, 30 or 15 minutes) charts. In addition to standard pivot point (P) and two support and resistance levels (S1 & S2 and R1 & R2), traders often track midpoints between adjacent levels for getting more accurate results. With pivot points, there are different strategies followed by Forex traders.

1. Range-bound traders enter a trade when the price cross an identified support level and exit the trade when the price nears the resistance level.
2. Trend and breakout traders enter a trade when the price level cross a significant resistance level and exit the trade when the pattern reverses.
3. Many traders look for candlestick formations (like shooting star and doji) to enter of exit trades.
4. Many traders check the strength of pivot point (P) before entering the trade. The idea is that strong pivot points can be effectively utilized as a support or resistance level.

With pivot points marketing timing is important. Although Forex market is a 24 hour market major price changes can occur at the opening hours of European, U.S. and Asian currency markets, and also the activity range differ greatly among trading hours of these markets.

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