Pivot points: Why you should make them part of your forex trading strategy

Julie Brownlee, Fsp Invest, 14 Jul. 2014

Tags: pivot points, what are pivot points, support, resistance, technical indicator, using pivot points, forex trading forex trading strategy, indicate market trends,

Pivot points are a very handy technical indicator to use for forex trading. They’re a really useful tool.

They can help you get in and out of trades.

So what exactly are pivot points? And what can you use them for?

Let’s take a closer look…

What are pivot points?

Pivot points are the average of highs, lows and closing prices from a previous trading range. This makes them a really simple tool to use.

If you use pivot points on a chart, the pivots are normally marked with R1, R2 and R3, Max Munroe in Forex Round-Up explains. These show the average highs. ‘R’ stands for resistance.

P shows you the average closing price.

And S1, S2 and S3 are for the lows. ‘S’ is for support.

Have a look at the chart below. It shows the euro against the dollar. You can see the weekly pivot points included on the daily chart, running down the right hand side…

Chart showing pivot points

How to use pivot points to show current market trends

If the market is trading above the P, the main pivot point, then the market is probably bullish. In other words, the market is climbing.

And the opposite is true. If the market is trading below the P, the market’s probably bearish. In other words the market is falling.

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As you can see, using pivot points in this way is very easy to understand. And this can only be a good thing. At a glance you can easily see the overall trend of the market.

And this is just one of the benefits of using pivot points when you trade.

So there you have it, why you should make pivot points part of your trading strategy.

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