The world of Forex trading has many advantages and also certain risks that should not be underestimated. Who has committed itself to successfully trade in the long term in foreign exchange, will not get around it, to acquire in-depth knowledge about the Forex basics. Part of this is also to know about the technical market analysis and to understand at least the key indicators and trading approaches. Pivot points among these important Forex indicators and then we want to introduce a little closer.
The most important thing about the Forex Pivot points at a glance:
- Pivot points are used in the technical market analysis
- With pivot points, support and resistance levels can be derived
- Seven Pivot Level exist
- Pivot points should be used always in combination with other evidence
1) What exactly are Pivot Points?
Forex Pivot Points are a very rudimentary and yet effective tool for generating trading signals. Especially in combination with pro-cyclical trades in trend direction provide the means courses useful results. Pivot points are in most major Forex charting software included. There are a total of five or even seven Forex Pivot Level, of which derived four or six of the actual pivot point (PP). This point (PP) is calculated as the arithmetic mean of the highest, lowest and last price of the previous period (which may in principle be minutes, hours, days, weeks, months, etc. -. In practice, however, are only intraday timeframe relevant). PP is therefore calculated from the price information contained in simple bar charts.
Conclusion: Pivot Points represent effective and simple to be calculated instruments that can determine trading signals. Overall are up to seven Pivot to find level and the individual Pivot points are calculated from the highest, lowest and closing price of a certain previous period.
2.) How to calculate the Pivot Points?
The main Forex Pivot Points are calculated as:
- Pivot rate = (peak price + Low + closing price) / 3
- Support U1 = (Pivot price) * 2 — peak price
- Resistance W1 = (Pivot price) * 2 — Low
- Unterstützung U2 = Pivot-Kurs – (W1 – U1)
- Widerstand W2: Pivot-Kurs + (W1 – U1)
Recorded the market under one of the W-points, this acts as a resistor. Conversely act U-points as a support when the market listed above. Similar to the Retracements in Forex Fibonacci Trading and horizontal resistances this meaning not, however, if the market goes above or below the respective brands. Records of the market above the W points are those classified as support and vice versa. From the calculated U and W points to support or resistance can be derived. If the market under a calculated W-point, this acts as a resistor and is of course on a U-spot, this is considered as support.
3.) The actions of Pivot Points in practice
It is strongly recommended not pivot in trading Forex points as the onlyForex trading signal to interpret. Forex Pivot Points are most meaningful when they are combined with other evidence, and they are interpreted procyclical. So it is quite promising to open a long position if the market traded in the lower U-points in an uptrend. Trading against the trend — as with a short position in the upper west region — on the other hand is very risky. Forex Pivot Trading is supported by almost every chart software that can plot the points more per click. Often it is advisable to seek within a week of trading for a valid for several days, and this common point to trade with the trend. Trading strategies that exclusively rely on the points that are unlikely to be successful as a rule, because the hit rate for lack of a more specific filter is too low.
Conclusion: Although Pivot Points can represent quality trading signals, they should never be called solely on market analysis. The best use of the Trader Forex Pivot Points in combination with other indicators in order still to be able to generate higher quality signals.