Reading pivots will help you spot trends and use them to your advantage. If the volume activity increases considerably then the reaction can be seen as a more reliable one. Pivots are popular to all styles of Forex Traders: A forex hedge is a foreign currency trade that's sole purpose Hence, we can see how powerful a pivot trading strategy can be and how much price action responds to them since they were affective price before the trend ended and the Fibonacci levels were even drawn.
BREAKING DOWN 'Forex Pivot Points'
The blue colored lines are the support pivots and the red colored ones are resistance pivots while the yellow are the mid-pivots. As the name suggests, support pivots are the intraday support levels for that day while the resistance pivots offer key resistance price levels to watch for that day.
We set our pivots to the London open since the London traders are basing their charts off their open and with the majority of traders coming out of London, we feel these will be the most effective and consistently watched by the institutional market. The Statistics The bottom line is price action has a greater chance to respond to a pivot level for that day than any other indicator out there. Meaning, if you are going to be in a trade for more than 1hr, chances are the price will touch, react or respond to a pivot.
Since the institutional traders move the market, they are likely placing orders here on an intraday basis more than anything else. How to use them for Reversals and Rejections? If you read our article on Impulsive vs. Corrective moves in reading price action, you will be able to easily spot these. Without needing a heavy IQ to see this is in a downtrend, we will look to take shorts on this pair. As you can see, the pair often pulls back giving us some intraday moves to get back into the trend at a higher price to sell it lower.
The Intraday charts and the Pivot Points The best way to get into these trends is to find a pullback on an intraday chart, like the 30m, 1hr or 4hr charts. We will use the 30m chart or this example although the pivots should not change as long as you are on any intraday time frame. They should be the same for the entire 24hrs from London open to London open. It gave a nice pullback which was not impulsive thus signaling the bulls had not come in with a domineering force.
Now, noticing the move back up is not impulsive, we should be looking for a sell entry point to get into the market. The chart above was without pivots, but the chart below has the pivots on giving us a clear price level to get into the market. Now we can see how after price reversed a little, it got stuck by the S2 pivot 2 nd blue line to the bottom which rejected price 5x before it broke. Price then advanced to where?
Now pivots by themselves are potent and we can certainly use them for our entries to reject or get into a reversal. However, when we combine them with a 20ema or Fibonacci retracement, they become that much more powerful.
Here is the chart below with both of them added onto the chart. As you can see, they all come together right around the 1. We could make the argument the Fibonacci levels were more important to the price action on the day, but before the sell-off ended, but until a trend is over, Fibonacci levels cannot be drawn. Hence, we can see how powerful a pivot trading strategy can be and how much price action responds to them since they were affective price before the trend ended and the Fibonacci levels were even drawn.
If you are serious about learning how to trade this market successfully, and find simple high-probability trades using pivots and price action only, you can check out the Advanced Price Action or the ProForex Course which will teach you rule-based proprietary forex pivot point trading strategy to trade these profitable setups.
I'm a verified profitable trader and trading mentor. A pivot point in Forex Trading is an important price level for those who are trading using technical analysis. In general, when a Forex currency pair trades above the pivot point it is considered as a bullish pair, while when a Forex currency trades below the pivot point it is considered as bearish. Calculating the Forex Pivot Points. You may calculate the pivot point of a currency pair easily by using the high, the low, and the closing price of this pair during a specific time period.
Usually that period is a trading day. Which Types of Traders are using the Pivot Points? Pivots are popular to all styles of Forex Traders: How to Trade using Forex Pivots? If a currency is at the beginning of a period when a pivot is reached then trading that currency may prove profitable. As the pivot point is reached and not broken.
If the volume activity increases considerably then the reaction can be seen as a more reliable one.