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How to Use Pivots Points for Day Trading

Pivot Points are used by traders to find support and resistance levels based on the previous day's price action.

 

This indicator is a very useful tool that use the previous bars' highs, lows and closings to project support and resistance levels for future bars.

 

This indicator provides an idea of where key support and resistance should be. Place the pivot points on your currency charts and price will bounce off one of these levels. These levels are used by investors to determine market tops, market bottoms or trend reversals.

 

  • Daily pivots points are calculated from previous day's high, low, close which ends at 5.00pm EST(2100 GMT)

 

This indicator is shown below

How to Interpret and Use Pivot Points in Forex Trading

 

 

Technical Analysis

The central pivot itself is the primary level, which is used to determine the trend

 

The other support and resistance levels are also important in calculating areas that can generate significant market movements.



This indicator can be used in two ways

The first way is for determining overall Forex trend: if the pivot point is broken in an upward movement, then the market is bullish, and vice versa. However, pivot levels are short-term trend indicators, useful for only one day until they need to be recalculated.

 

The second method is to use these points to enter and exit the markets. This indicator is a useful tool that can be used to calculate the areas that are likely to cause price movement.

 

These points should be used conjunction with other forms of technical analysis such as Moving averages, MACD and stochastic oscillator.

 

This indicator can be used in many different ways. Here are a few of the most common methods for utilizing them.

 

Trend Direction: Combined with other technical analysis techniques such as overbought/oversold oscillators, volatility measurements, the central point may be useful in determining the general trending direction of the currency exchange market. Trades are only taken in the direction of the Forex trend. Buy signal occurs only when the market is above the central pivot and sell signal occur only when the market is below the central pivot.

 

Price Breakouts: A bullish signal occurs when the market breaks up through the central pivot or one of the resistances (typically Resistance 1). A bearish signal occurs when the market breaks down through the central point or one of the supports (typically Support 1).

 

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Forex Trend Reversals:

  • A buy signal occurs when the price moves towards a support level, gets very close to it, touches it, or moves only slightly through it, and then reverses and moves back in the opposite direction.

 

  • A sell signal occurs when the price moves towards a resistance level, gets very close to it, touches it, or moves only slightly through it, and then reverses and moves back in the opposite direction.

 

Stop loss and/or Limit Profit Values Determined by Support/Resistance: This indicator may be potentially helpful in determining suitable stop loss and/or limit profit placements. For example, if trading a long breakout above the Resistance 1 it may be reasonable to position a stop loss.

 

 

Combining with Moving Average Crossover System

A good indicator to combine and trade reversal signals is the moving average crossover which can be used to confirm the direction of a reversal signal.

 

An investor can then open an order once these two indicators give a signal in the same direction.

Moving Average Crossover Method with Pivot Points Indicator

Moving Average Crossover Method

 

Moving average crossover method that can be combined with this indicator to come up with a trading system for generating buy and sell signals.

 

To download Pivot points:

https://c.mql5.com/21/9/pro4x_pivot_lines.mq4

Once you download it open it with MQL4 Language Editor, Then Compile it by pressing the Compile Button and it will be added to your MT4.

NB: Once you add it to your MT4, the indicator has additional lines named Mid Points, to remove these additional lines open MQL4 Language Editor(shortcut keyboard key - press F4), and change line 16 from:

extern bool midpivots = true;

to

extern bool midpivots = false;

Then Press Compile again, and it will then appear as exactly shown on this website.

Forex Market Sentiment

The EURUSD is at a major support level, Open an account and start trading EURUSD which is oversold and at a major support level: Read The Article "Support and Resistance levels"

Another reason to start being bullish on the EURUSD and EURJPY is Risk Appetite vs The Risk Averse sentiment used when trading high yielding currencies vs the US Dollar and the Japanese Yen when world economies start reporting data that is supporting economic growth: Read The Article "Risk Appetite vs The Risk Averse"


Eurozone Economic Growth Gains Momentum in November - Eurozone economic growth accelerated to its fastest pace and was at an all-time high, order books grew and factories were prompted to add more workers and raise the prices of their goods as the economic environment in Europe grew the fastest as shown by economic data – November Composite PMI for manufacturing and services grew to the strongest in 18 months and was at an all-time high of 54.1, up from 53.3 in October. There are two PMI data reports - one for manufacturing and the other one for services. The PMI for manufacturing was at an all-time high of 34 months and rose to 53.7 in November while that of services rose to an all-time 11 months high of 54.1; Marking a strong expansion in economic growth and signaling that the recovery in Europe is continuing to gather momentum thanks to the €1.7 trillion quantitative-easing program being carried out by ECB in Europe. IHS Markit has said that companies are on boarding new staff at the fastest pace ever since 2008, as the prices of goods increased the most in five years as companies continued to pass the production cost to their consumers – the November PMI showed the steepest monthly increase in business activity with plenty of signs that the economic growth will continue to accelerate as the inflation in Europe continues to intensify steadily. Open an account and start trading EURUSD and EURJPY today.


Major Market Mover - Non Farm Payrolls on Friday: Open an Account Today and Trade NFP on Friday

First OPEC Deal on Oil production cut in 8 years fuels more risk appetite: Open an Account Today - Don't Miss Out on the trades


Read The Articles: Eurozone Economic Growth Gains Momentum in November - Fueling Risk Appetite in FX trading


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