Forex Opening Closing Times
Pivot Points in Forex: Mapping your Time Frame
It helps to have a map and see where the price is relative to the previous market share. This is what is so see what the sentiment of traders and investors at any given time, also gives a general idea of where it is headed market during the day. This information can help us decide which way to trade.
Pivot points a technique developed by floor traders, help us see where the price is relative to previous market action.
As a definition, a pivot point is a turning point or condition. The same applies to the foreign exchange market, the pivot is a level at which the feeling of change market "bull" to "bear" or vice versa. If the market breaks this level up, then the sentiment is said to be a bull market and are likely to continue their way, on the contrary, if the market breaks this level down, then the sentiment is bear, and is expected to continue its way down. Again level, the market is expected to have some kind of support or resistance, and if the price can not break the pivot point, a possible rebound is plausible.
Pivot points work best on highly liquid markets, such as the spot market, but also can be used in other markets as well.
Pivot Points
In short, pivot point is a level at which the sentiment of traders and changes investors bull to bear or vice versa.
Why PP work?
They work simply because many traders and investors use and rely on them as well as banks and institutional traders. It We know that every trader that the pivot point is an important measure of strength and weakness of any market.
style = "mso-bidi-font-weight: normal"> calculation of turning points
There are several ways to get to the pivot point. The method we found that the most accurate results is calculated by taking the average high, low and close of an earlier period (or session).
Pivot point (PP) = (High + Low + Close) / 3
Take for example the following EUR / USD information from the session Previous:
Open: 1.2386
Height: 1.2474
Low: style = "mso-spacerun: yes"> 1.2376
Close: 1.2458
The PP would
PP = (1.2474 + 1.2376 + 1.2458) / 3 = 1.2439
What is this number tell us?
Simply tells us that if the market is trading above 1.2439, Bulls are winning the battle pushing prices higher. And if the market is trading below this 1.2439 the bears are winning the battle by pulling prices lower. In both cases, this condition is likely to keep until the next period session.
Since the Forex Market is a market of 24 hours (no make or break day by day) There is an eternal battle on deciding at white time we should take the open, close, high and low of each session. From our point of view, the times to ensure accuracy of the predictions is open at 00:00 GMT and close at 23:59 GMT.
Also the calculation of the PP, there is another kind of support and resistance levels are calculated taking the PP as a reference.
Support 1 (S1) = (PP * 2) – H
Resistance 1 (R1) = (PP * 2) – L
Support 2 (S2) = PP – (R1 – S1)
Resistance 2 (R2) = PP + (R1 – S1)
Where H is the High the previous period and L is the low of the previous period
Continuous the example above, PP = 1.2439
S1 = (1.2439 * 2) – 1.2474 = 1.2404
R1 = (1.2439 * 2) – 1.2376 = 1.2502
R2 = 1.2439 + (1.2636 to 1.2537) = 1.2537
S2 = 1.2439 – (1.2636 to 1.2537) = 1.2537
These levels are supposed to mark support and resistance levels for the current session.
In the example above, the PP was calculated using information the previous session (previous day). In this way we could see possible intraday resistance and support levels. It can also be calculated using weekly or monthly data above to determine such levels. Thus we can see the feeling for long periods of time. We can also see possible levels that can provide support and resistance throughout the week or month. Pivot point calculation on a weekly or monthly basis is mostly used by long-term traders, but can also be used by traders short time, gives us a good idea on the long-term trend.
style = "mso-bidi-font-weight: normal "> S1, S2, R1 and R2 …? An alternative objective
As above, the pivot point area is a well known technique and it works simply because many traders and investors use and trust it. But what about the other support and resistance zones (S1, S2, R1 and R2), to provide a level of support or resistance to a mathematical formula is somehow subjective. Is difficult to just blindly trust them because the formula skipped that level. For this reason, we have created an alternative way to map our time frame, simple but more objective and effective.
We calculate the pivot point as showed before. But our support and resistance levels are drawn in a different way. We take the previous session high and low, and draw from these levels in the Graph today. The same goes for the session before the previous session. Therefore, we will have our PP and four more important levels drawn in our chart.
LOPS1 under the previous session.
, Alta HOPS1 of the previous session.
, Low LOPS2 session before the previous session.
, Alta HOPS2 session before the previous session.
PP, point of rotation.
These levels will tell us the strength of the market at any given time. If the market is trading above the PP, then the market is considered in a possible uptrend. If the market is trading above or HOPS1 HOPS2, then the market is a trend upward, and only take long positions. If the market is trading below the PP then the market is considered in a possible downtrend. If the market is trading LOPS2 LOPS1 or below, then the market is in a downtrend, and should only be considered short transactions.
The psychology behind this approach is simple. We know that for some reason the market did not stop going up / down from the previous session, or The meeting before that. We do not know why, and do not need to know. We only know the fact: the market reversed at that level. We also know that traders and investors have memories, they do remember that the price stopped there before, and it is likely that the market reverses from there again (perhaps the same reason, and perhaps not), or at least find some support or resistance at these levels.
What Is important about his approach is that support and resistance levels are measured objectively, not just a secondary level of a mathematical formula, the price of investing there before so these levels are more likely to be effective.
Our allocation method works conditions in both markets, where trends and conditions aside. In a trending market, helps us to determine the strength of the trend and trade levels important. In sideways markets shows possible levels of investment.
"How we use our method of allocation?
We at StraightForex ( href = "http://www.straightforex.com/"> www.straightforex.com) use the allocation method in three different ways: as a determination trends (measure of strength of the trend), a trading system with significant levels of price performance as a trading signal and to determine how reward risk (RR) from the same office in the place where the market in relation to the previous session. About the Author
Raul Lopez is a full time Forex trader and founder of http://www.straightforex.com a high quality Forex training company.
FOREX Trading | FOREX Training – November 28, 2006