How to Use Pivot Points in Forex Trading

At the same time, your target should be on R2. Firstly, I will show you how to use pivot points as a part of a pure price action trading strategy, without the assistance of any additional trading indicator. On high volatile market conditions , a break of the first support or resistance pivot level will mostly lead to a move to the next level S2 and R2 respectively. We should first calculate the main daily pivot point. If the market breaks this level up, then the sentiment is said to be a bull market and it is likely to continue its way up, on the other hand, if the market breaks this level down, then the sentiment is bear, and it is expected to continue its way down. LOPS2, low of the session before the previous session.

EUR/USD Pivot Points Explanations Pivot points are very useful tools that use the previous bars’ highs, lows and closings to project support and resistance levels for future bars. Daily pivot points are useful for swing trading; while 4 .

Pivot Point Lingo

As you can see, pivot points consist of seven lines in total: Note that the support and resistance lines work the same way as traditional horizontal support and resistance lines. When the price approaches one of the support levels, there is a high probability that it will bounce and reverse — and the same applies to the resistance levels. However, once a support or resistance line breaks, it will change its nature and become a resistance or support line, respectively.

This is an additional reason why pivot points work so well in the forex market, as the high liquidity ensures the absence of any type of market manipulation and technical support and resistance levels tend to be respected by market participants around the world — to such an extent that they become almost self-fulfilling.

Once all pivot points are calculated, they remain valid for the current trading day and can be displayed and traded on across all timeframes.

This pivot point is the used to calculate the remaining support and resistance levels for the current trading day:. Please note that some trading platforms use a different way to calculate the Resistance 3 and Support 3 levels, which is shown below:.

Well, the first thing you should analyze is the current market condition. Is the market ranging or trending? Depending on this, you will use pivot points either to trade bounces or to trade breakouts out of the pivot points. Basically, as we already said, pivot points act as normal support and resistance lines and are used to identify possible turning points in the market. This means, when the price approaches a resistance level, a sell opportunity arises. And when the price approaches a support level, a buy opportunity arises.

At point 1 , the price reached the Support 3 pivot point, which is a strong signal that we could see a reversal. It creates a buying opportunity, with a stop-loss just below the Support 3 level. Point 2 marks the price at the Resistance 3 level, which again creates a selling opportunity with a stop-loss above the R3 level.

The price bounced off the R3 level and went all the way down to the S1 level Point 3 , which is also our profit-taking level. As you can see at point 3 , a hammer pattern formed which signals that the price might reverse again. Again, we could enter here with a buy order and put the stop-loss just below the S1 level.

Point 4 is our exit target and simultaneously opens the possibility to enter with a sell order. The method we found to have the most accurate results is calculated by taking the average of the high, low and close of a previous period or session.

It simply tells us that if the market is trading above 1. And if the market is trading below this 1. On both cases this condition is likely to sustain until the next session. Since the Forex market is a 24hr market no close or open from day to day there is a eternal battle on deciding at white time we should take the open, close, high and low from each session. From our point of view, the times that produce more accurate predictions is taking the open at Besides the calculation of the PP, there are other support and resistance levels that are calculated taking the PP as a reference.

On the example above, the PP was calculated using information of the previous session previous day. This way we could see possible intraday resistance and support levels.

But it can also be calculated using the previous weekly or monthly data to determine such levels. By doing so we are able to see the sentiment over longer periods of time.

Also we can see possible levels that might offer support and resistance throughout the week or month. Calculating the Pivot point in a weekly or monthly basis is mostly used by long term traders, but it can also be used by short time traders, it gives us a good idea about the longer term trend. An Objective Alternative As already stated, the pivot point zone 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 forecast a support or resistance level with some mathematical formula is somehow subjective. It is hard to rely on them blindly just because the formula popped out that level. For this reason, we have created an alternative way to map our time frame, simpler 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.

The same is done with the session before the previous session. So, we will have our PP and four more important levels drawn in our chart. LOPS1, low of the previous session. HOPS1, high of the previous session. LOPS2, low of the session before the previous session.

HOPS2, high of the session before the previous session. These levels will tell us the strength of the market at any given moment. If the market is trading above the PP, then the market is considered in a possible uptrend. If the market is trading below the PP then the market is considered in a possible downtrend.

The psychology behind this approach is simple.

Daily Pivots and supports and resistances for EUR/USD

Pivot Points are widely used by day traders to quickly determine where forex market sentiment may change between bullish and bearish. Pivot Points are also commonly used to find likely Support and Resistance levels. Professional forex traders and market makers use pivot points to identify potential support and resistance levels. Simply put, a pivot point and its support/resistance levels are areas at which the direction of price movement can possibly change. EUR/USD Pivot Points. Please check the daily pivot points for EUR/USD and also the associated resistance and support levels. The calculations for the daily pivots are done as per the opening and closing prices at GMT We update Fibonacci, Woodie and camarilla pivot points along with the most commonly used standard pivot points for .