Pivot Points Technical Analysis and Pivot Points Forex Trading Signals
This indicator consists of a central pivot which is surrounded by 3 resistance levels above and 3 support levels below.
Initially these points were used by floor traders to analyze and trade the equities and futures exchange markets. This indicator is considered to be leading rather than lagging.
Pivots provide a quick way for forex traders to analyze the general trend of how the market is going to be moving during the course of the day. A few simple calculations are used to plot the resistance and support levels.
To calculate these points for the coming trading day is the previous day's
- low, and
- close prices are used
The Forex trading day closes at 5:00PM EST this daily 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 levels as follows:
Technical Analysis and Generating Signals
This indicator can be used in different ways to generate Forex trading signals. The following methods are the most common technical analysis:
Trend Identification Signals
The central pivot is used by traders to determine the general market trend direction. The trades taken will only be in the direction of the market trend.
- Buy signal - price is above the central point
- Sell signal - price is below the central point
Price Breakout Signals
Price breakout signals are generated as follows
- Buy signal- is generated when the price breaks upwards through the central point.
- Sell signal- is generated when the price breaks downwards through the central point.
Price Reversal Signal
Price reversals are generated as follows
Buy signal- when price moves down towards one of the support level, then touches the support or moves slightly through it then quickly reverses and moves upwards.
Sell signal- when price moves up towards one of the resistance level, then touches the resistance or moves slightly through it then quickly reverses and moves downwards.
Price Reversal Signal
Setting Stop loss and Limit Profit Values
The central pivot and the other support and resistance levels 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 the take profit level, and the Support 1 can be set as the Stop Loss Level for the trade.
To download Pivot points:
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;
extern bool midpivots = false;
Then Press Compile again, and it will then appear as exactly shown on this website.