Daily Pivot Points Forex
Forex Trading Pivot Points
Those of you who have been negotiating for a while will be familiar with pivot points. During this lesson I go about finding a pivot point and also a slightly different method to use. First let's see how to calculate a pivot point.
The use of a bar chart you will notice that each bar has an open, High, Low and Close. This information represents all price activity during that period in particular.
For the following example, use a daily bar. To calculate the pivot point all you need do is add the High, Low and Close. Once this has been to do then divide the total by three, for example, the FTSE cash on the 2nd May 2 had a maximum of 5192.70, a minimum of 5125.50, and closing of 5174.10. If you add all three together, you get 15492.3. Then divide that total by three to get a turning point of 5164.10.
OK, so now everything is fine, but what to do with this information? Well, a technique I like to use intra-day is to use the pivot point as a trend indicator. We know that the pivot point for the 02 May was 5164.10 and we will use the next day as an intra-day trend indicator.
If the price is above 5164.10, then only long and if it were below 5164.10, I just want to be brief.
As price can fluctuate around any given point I also add an addendum. If I have to close the support of 5164.10, first wait for the price to pass through 5164.10 and support before entering shorted. If I have resistance close to 5164.10, first wait until the price moves through the pivot point and resistance before entering long.
This method becomes even more powerful when the turning point is near the opening price. If, for example, the opening price is 5174.10, the pivot point is 5164.10, and finally uncovered in 5155, I fall short all day long when not above the pivot point.
Once in a position that normally have a very tight stop to begin with and then follow the market with a trailing stop to lock in profits.
Another way I like to add items Pivot of my analysis is that more long-term projections. I will use the pivot point of a yearly, monthly and weekly chart. In this case, would be the High, Low and close of the previous year, month and week.
I like to think of the weekly Pivot Point in the short-term, monthly as the medium-term trend the annual and long-term trend. This is especially useful in Spot Forex. If I am below the yearly, monthly and weekly Pivot Point, I know I'm in a trend bass player and I can scale in multiple positions over time. The same is true for long positions.
The point is that there are many ways to determine the trend. Also Use Pivot Point to find potential support and resistance, which we cover in later lessons.
Experiment with Pivot Points and see if it suits your style negotiation. At least it is always useful to know where they are and can help you decide which side of the market should operate from.
About the Author
Martin Chandra is a full-time investor. To learn more about pivot points, go to here.
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