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Posted on Oct 08, 2018 at 02:47 PM
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Forex Trading Strategy: Using Pivot Points, Supports & Resistance To Spot Winning Entries & Exits

Do you struggle a lot trying to get the best entry and exit point for your trades? Not anymore! You are about to learn the best way to use pivot points, support and resistance to enter and exit the Forex market so you can close more profitable trades.

A general flaw of many traders is the habit of seeking “certainty” via indicators. It’s not uncommon to see charts with five to seven indicators overlaid on them.

However, traders that seek certainty are not always thorough enough to dig deep into the indicator to understand how it’s built.

In this article, we will look into a very useful indicator that can generate significant reference points which are useful for pinpointing Entry Levels, Stop Loss Levels and Profit Targets.

Reference Points

PIVOT POINT TRADING: UNIVERSAL, DEPENDABLE, RELIABLE

The Pivot Point is the level at which the market direction changes for the day. It’s an indicator that is essentially based on price action which helps a trader find key price levels in the market.

Every day, the market for each financial asset has an OPEN, HIGH, LOW and a CLOSE. Using some simple arithmetic with these data, a series of points are derived: PIVOT, SUPPORT & RESISTANCE levels.

Pivot Points are reactive because many floor traders follow it, making them dependable and reliable.

Rather than lagging, they are PREDICTIVE: You use the data from the previous day to calculate potential turning points for the present day.

CALCULATING PIVOT POINTS

  • Standard Pivot Points Formulas
  • R3 = H + 2( Pivot – L
  • R2 = Pivot + ( H – L )
  • R1 = ( 2 x Pivot ) – L
  • Pivot = ( H + L + C ) / 3
  • S1 = ( 2 x Pivot ) – H
  • S2 = Pivot – ( H – L )
  • S3 = L – 2( H – Pivot )

To get your Pivot Point Calculations, kindly visit www.actionforex.com > Markets > Pivot Points.

Picture2

USING PIVOT POINTS: APPLICATION & TRADE BIAS

  • The three (3) most important pivot points are R1, S1 and the actual Pivot Point.
  • The general idea behind trading pivots are to look for REVERSAL or BREAK of R1 or S1. By the time the market reaches R2, R3 (for BUY trades) or S2, S3 (for SELL trades), the market will already be overbought or oversold and “these levels should be used for EXITS rather than ENTRIES”.
  • A perfect setup would be for the market to open above the pivot level and then stall slightly at R1 then go on to R2.
  • You would then enter on a break of R1 with a target of R2.
  • If the market was really strong, close half at R2 and target R3 with the remainder of your position.

TRADE ENTRIES & EXITS WITH PIVOT POINTS

#1 BREAKOUT WITH INDICATORS

  • On 09/04/18, Pivot was a strong support before a price surge that hit R1
  • 1st SELL signal: price falls from R1
  • 2nd SELL signal: two MAs crossover & show divergence right above Pivot
  • 3rd SELL signal: MACD flips down with a huge bearish candle crossing Pivot simultaneously
  • Take Profits/Exits: S2 for Day1, S1/S2 for Day2, S1 for Day3

Picture 4i

#2: THE PULLBACK TRADE

  • Price broke down through all known support to new levels below and couldn’t get new support going into the next day.
  • By the 3rd day, price reaction at R1 caused by News, precisely from S1, Pivot & all the way to R3.
  • Pivots and Resistance levels provided excellent Entries with Support as perfect exit points for the entire week.

Picture 5i

 

HERE IS THE TRADE RESULT ON THIS STRATEGY

Trade Result 1Trade Result 1

Buddy! You’ve got a little assignment! Go on and analyse  the trade below using the strategy you just learnt! Be sure to leave your analysis/comment in the comment section below.

The first 10 traders with accurate analysis gets a Free E-book on Pivot points. Leggo!

Picture 8

 

 

 


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Previous Comments

  • JESSE ABAH
      Oct 09, 2018 at 05:56 PM

    Please kindly roll this study into PDF format to enable me download for future reference , thank ye .

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  • JANE ONYEMEH
      Oct 09, 2018 at 05:56 PM

    Here, price got to R1 and did a pull back and is at the previous support. If it breaks that support, it will be a bearish market but if not, it will move upwards.

    View Replies Reply

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