Pivot Points is a veteran of technical analysis since a mathematical scientist developed the scientific platform in the first half of the 20th century! The creator of the reference point method is the American mathematician Henry Сhase. This method was to the taste of the players who worked in the “stock pit.” Initially, Pivot Point was used for trading on stock markets. Over time, the currency market became available to a wide range of people, and the indicator was quite successfully used when trading currency pairs.
Interestingly, forex pivot point strategies for traders of that time became something similar to a forecast that implements itself. The fact is that the indicator was so popular that all speculators of the middle of the last century used it exclusively and made deals following it. The forecast worked because many players simultaneously opened deals in the same direction. Pivot point trading strategies kept simple are easy to understand even for novice traders.
Peculiar features of pivot point trading strategies
The Pivot Point technique is easy to understand. For calculations, use the values of the extremes of the previous trading period, as well as the closing price. This data is used to determine the average value. These points are called reference points, growth points, or equilibrium points. On their basis, support and resistance levels are formed, as well as the Central Pivot axis is built. Together, the points, lines, and axis allow you to make forecasts of price movement.
A minimum of calculations will be used to build the indicator.
It would be best if you understood the connection between candlesticks and pivot point strategies. By default, each terminal generates support and resistance lines once a day for the daily candle of the previous trading period. Still, it uses the indicator for trading within the day. This time difference is necessary for the correct display of the tool in pivot point trading strategies. If the periods of the price chart and the indicator chart are the same, it will be reflected as a point instead of a line. If the timeframe of the indicator is less than the one on which it is used, it will not be visible at all.
Traders who use Pivot strategies regularly recommend using the indicator not only with a daily timeframe but also with a weekly, monthly, and annual one. If the levels built on different periods coincide, it strengthens the data of the chart.
Classic technical analysis on Pivot points strategies states that after the opening of the trading session, the price will be drawn to the nearest reference point. Accordingly, it would help if you traded, predicting such a movement. Here are the basic rules of trading on Pivots Point:
- Open sell trades if the price falls below the Central axis;
- Open a buy position if the price is above the Central axis;
- Buy an asset if the price has rebounded from the first, second or third support line;
- Сlose the position if the price bounces off the resistance levels.
Compliance with these rules is guaranteed to bring success In pivot strategies.
Every trader dreams that the market will always have a clear upward or downward trend. After all, this allows you to replenish your Deposit seriously. As practice shows, this dream is realized only by 30-40%. In the remaining 60% -70% of cases, the market can be observed banal consolidation of prices.
Many traders neglect this situation and try not to enter the market, waiting for the beginning of a strong trend, while losing serious amounts! To get the most out of the trading session, you need to find a decent trading strategy in the flat. Perhaps one of the easiest is to trade on Pivot strategies.
The benefits of forex pivot point strategies
As you might guess, the market has only two moods: bearish and bullish. The Pivots Point indicator makes it easy to identify it. To do this in pivot strategies, we only need the Central axis of the tool. If the chart has broken it from the bottom up, then this is a bullish mood. It would help if you opened deals to buy because traders are set to increase the price. If the breakdown occurred from the top down, the market mood is bearish. It is better to refrain from trading or open short positions. That’s it!
The Pivot strategies method is extremely simple! Even a schoolboy will understand the calculation algorithm and plotting! However, the indicator is very accurate and versatile. The best results are shown when trading inside the day! It applies to any exchange but is very popular with traders who work in the Forex market.