Pivot Points Analysis and Pivot Points Signals
This indicator consists of a central pivot which is surrounded by 3 resistance areas above & 3 support levels below.
Initially these points were used by floor traders to analyze & trade the equities and futures exchange markets. This indicator is considered to be leading rather than lagging.
Pivots provide a quick way for traders to analyze the general trend of how the market is going to be moving during the course of the trading day. A few simple calculations are used to plot the resistance & support levels.
To calculate these points for the coming day is the previous day's
- high,
- low, and
- close prices are used
The Forex day closes at 5:00PM EST this daily market closing time is when the indicator is updated.
The 24-hour cycle for this indicator are calculated using a complex formula. The central pivot is then used to calculate the support and resistance zones as follows:
Resistance 3
Resistance 2
Resistance 1
Pivot Point
Support 1
Support 2
Support 3
Forex Analysis and How to Generate Trading Signals
This indicator can be used in different ways to generate Forex signals. The following techniques are the most common technical analysis:
Trend Identification Signals
The central pivot is used by traders to determine the general market trend direction. The trade transactions taken only will be in direction of the market trend.
- Buy signal - price is above the center pivots point
- Sell signal - price is below center pivots point
Price Breakout Signals
Price breakout trade signals are generated as follows
- Buy signal - is generated when price breaks-out up-ward through the central point.
- Sell signal - is generated when price breaks out downward through the central point.
Price Breakout
Price Reversal Signal
Price reversals are generated as follows
Buy Signal- when price moves down toward one of the support area, then touches support or moves just slightly through it then quickly reverses & moves upward.
Sell Signal- when price moves up toward one of the resistance level, then touches the resistance or moves slightly through it then quickly reverses & moves downward.
Price Reversal Signal
Setting Stop loss and Limit Profit Values
The central pivot and the other support & resistance zones are used by traders to determine suitable stop loss and limit profit levels.
Setting Stop loss and Limit Profit
If a buy is placed above the central point the Resistance 1 or Resistance 2 can be used to set take profit level, & the Support 1 can be set as a StopLoss Level for the trade.
To download Pivot points technical Indicator:
https://c.mql5.com/21/9/pro4x_pivot_lines.mq4
Once you download it. Open it with the MQL4 Language MetaEditor, Then Compile the indicator by clicking Compile Button & it will be added to your Meta Trader 4 Trading Software.
NB: Once you add it to your Meta Trader 4 Trading Software, the indicator has extra lines referred to as MidPoints, to remove the extra lines open MQL4 MetaEditor(short cut key-board key - tap F4), & change line 16 from:
Extern bool mid-pivots = true:
To
Extern bool mid-pivots = false:
Then Press Compile Button again, & it will then appear as shown on this site.
