Action forex daily pivots

0 Daily Pivot Points Forex Indicator. This indicator draws the daily pivot point on any forex chart. Technical traders look to buy above the daily pivot(PP) and look to sell below the daily pivot point.

When you plot your pivot point indicator on your chart, you should see something like this: A stop loss should be used in this trading strategy the same way as with the previous strategy. The prices continues to move downward.

Forex Pivot Points

Daily pivots are calculated from previous day’s high, low, close which ends at 5pm est or 21pm GMT. 4 Hours pivots are calculated from previous 4 hours bar which ends at , , , , , GMT. The pivot levels and charts are updated throughout the day to cater for data adjustments during the day.

Usually, the previous candle would have closed above this line, so the key to the trade is to wait for a possible pullback to this line. This is the situation seen in the chart. The breakout candle closes well above the blue pivot, so it would be better to wait for a pullback before the long entry.

A more appropriate entry would be a Buy Limit trade, using the price at the blue pivot as the entry price.

Stop Loss for Long Entry: Knowing when to exit a trade is key and this can be achieved as follows: The next pivot line above the blue pivot the yellow pivot is the 1 st TP point. This is the situation seen on the chart.

If the next pivot target is broken by price action, you can apply a trailing stop to protect profits and follow the trade to the next pivot area. Usually, price would have broken the blue pivot line previously. Allow the price action to pull back to the blue pivot. A more appropriate trade entry in this scenario is a Sell Limit trade. This is set using the blue pivot as the entry price.

Naturally, the first pivot line below the blue pivot is the 1 st TP target TP1. Sometimes, the move may be very strong and will break that pivot. These are the daily high, the daily low and the close. Once you have that, then you could just plot the pivot lines on your trading chart within your trading platform.

Most of the trading software available today will have a pivot indictor that will calucatate these levels for you automatically and plot them on your chart.

First, check the list of indicators your trading platform offers. You can find many Pivot Point Indicators online, which you could simply add to your platform. Browse the net and you will definitely find a pivot point indicator available usually for free somewhere. You may have to import the indicator and then extract the files in the indicators folder of your trading platform. Once you have done this, you will be able to apply the pivot point indicator directly on your chart.

When you plot your pivot point indicator on your chart, you should see something like this: The horizontal lines on the chart are the pivot points. The blue line is the central pivot point. The lines above the main pivot point are R1, R2, and R3. We also put three vertical lines on the chart. These three lines separate the different trading days. Notice that the pivot levels of every trading day are lined differently. This is so, because each trading day has different daily high, low and close values.

In this manner, the pivot levels are different too. This is why there is a rapid switch in the levels of the pivot lines for every trading day. There are few basic rules when trading pivot points.

Since we have discussed the structure of the pivot points and the way they are calculated, it is now time to demonstrate pivot trading using some chart examples.

Have a look at the image below: The circles show moments when the price consolidates and hesitates in the area of a pivot point.

The arrows show moments when the price finds support or resistance around a pivot point level. In this example we see price hesitate around a level 4 times and in 8 instances we have a price reversal after interaction with a pivot point. Now that we have seen pivot points in action, we will now turn to applying some pivot point trading strategies.

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. We will rely on regular breakout rules to enter the market.

If we enter the market on a breakout, we will put a stop loss below the previous pivot point. We will target the second pivot point level after the breakout. Take a look at this chart: There are two breakouts through the PP level, which could be traded.

The first breakout through the blue pivot line comes in the beginning of the chart. A stop loss order should be put right above R1 — the first pivot level above the main pivot point. The target should be S2 — the second level below the main pivot point.

It is very important to emphasize, that if your trade is held overnight, then the pivot points will likely change for the next day. In this manner, your stop loss and target may need to be adjusted to reflect the new levels.

The price starts increasing after reaching the target. This is a good long position opportunity. If you want to take this long opportunity, you should place your stop loss order right below S1, which is not visible on the picture in this particular moment. At the same time, your target should be on R2. After breaking the main pivot point the price starts increasing and it breaks through R1.

On the next day, the pivot levels are different. The price decreases to the central pivot point and it even closes a candle below. However, the candle is a bullish hammer, which is a rejection candle formation. This hints that the trade should stay open.

Furthermore, the stop loss below S1 is still untouched. The price then starts a consolidation which lasts until the end of the trading day.

When the next trading day comes, the pivot points are readjusted again and they are tighter. The main pivot point is higher. The price tests the main pivot point as a support again and bounces upwards. This implies that the uptrend might continue, which puts on the table a third trading opportunity. If you go long here, you should place a stop right below R1. Since the trade is long and it is open on a breakout through R2, the target limit order should be placed somewhere above R3 we have no R4 level.

You could also use your own price action rules to determine how long you should stay in the trade. The point of this strategy is to match a pivot point breakout or bounce with a MACD crossover or divergence.

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