INTRODUCTION.
There is no single formula for trading successfully. There are formulas that have been around and that works. Pivot Specifically, is about keeping things simple, well organized, and as profitable as possible. No over-thinking nor over-analyzing with charts being an optional tool-set in using. Using Pivot Specifically, you will find that certain instruments trade much more orderly than others. Erratic instruments make it difficult to produce profitability. Therefore, it is necessary to trade instruments that respond and respect pivot levels. High volatile instruments have a tendency to create false-breakouts (fakeouts) giving the trader the assumption that price will continue to move once its breaks through a S/R level. Instruments such as USD/JPY tends to adhear to and acknowledge the psychological idea of Pivots and S/R levels all the while giving the trader a working platform for profit.
FORMULA
While there are several different methods for calculating pivot points, the most common method of which is the Five-Point System. This system uses the previous day's high, low and close, along with two support levels and two resistance levels (totaling five price points) to derive a pivot point. The equations are as follows:
R2 = P + (H - L) = P + (R1 - S1)
R1 = (P x 2) - L
P = (H + L + C) / 3
S1 = (P x 2) - H
S2 = P - (H - L) = P - (R1 - S1)
Here, "S" represents the support levels, "R" the resistance levels and "P" the pivot point. High, low and close are represented by the "H", "L" and "C" respectively. Note that the high, low and close in 24-hour markets (such as currencies) are often calculated using New York closing time (4pm EST) on a 24-hour cycle. Limited markets (such as the NYSE) simply use the high, low and close from the day's standard trading hours. Some good sources for daily pivot numbers is FX Street http://m.fxstreet.com/pairs/ (by clicking your pair of choice to view the day's pivot levels for that pair) and Global View http://www.global-view.com/forex-tra.../chartpts.html.
RULES.
When using Pivots Points and S/R Levels, the rules are simple:
1. BUY only if Price is ABOVE the Pivot Level. SELL only if Price is BELOW the Pivot Level.
2. Use S/R Levels for TAKE PROFIT opportunies.
3. Never counter-trend trade.
A. Entry's should be above or below the pivot.
B. Exit's and Take Profits orders should be the closest S/R Levels.
C. Protective Stop Loss orders are always the Pivot Level.
NOTES.
Different instruments trade differently. Important note that must be considered when trading pivots. Charts are a tool-set that should be consider optional. This is a pure price action strategy. The most important day-to-day aspect that must be remembered is, what price is the daily pivot and which way is the market currently heading? If price is above the pivot level, buy until it reaches a S/R Level. If price is below the pivot level, Sell until it reaches a S/r Level. Trading done simple!
Keep your daily expectation modest and never counter-trend trade. Pivots are all about keeping you on the right side of the trade and in helping you follow the daily trend. Keep realistic expectations in that this is not a get rich quick strategy. It is an easily, implemented wealth building strategy.
Example.
Date: 28th of July
Chart: Eur/Gbp
Pivot: 0.8644
Price Action: Below the Pivot which indicates a SELL option
Take Profit: S/R Level 0.601
Outcome: 40pip profit was made for the day
Update: in the near future I will be discussing Pivot counter-trend trading possiblilities and downfalls.
There is no single formula for trading successfully. There are formulas that have been around and that works. Pivot Specifically, is about keeping things simple, well organized, and as profitable as possible. No over-thinking nor over-analyzing with charts being an optional tool-set in using. Using Pivot Specifically, you will find that certain instruments trade much more orderly than others. Erratic instruments make it difficult to produce profitability. Therefore, it is necessary to trade instruments that respond and respect pivot levels. High volatile instruments have a tendency to create false-breakouts (fakeouts) giving the trader the assumption that price will continue to move once its breaks through a S/R level. Instruments such as USD/JPY tends to adhear to and acknowledge the psychological idea of Pivots and S/R levels all the while giving the trader a working platform for profit.
FORMULA
While there are several different methods for calculating pivot points, the most common method of which is the Five-Point System. This system uses the previous day's high, low and close, along with two support levels and two resistance levels (totaling five price points) to derive a pivot point. The equations are as follows:
R2 = P + (H - L) = P + (R1 - S1)
R1 = (P x 2) - L
P = (H + L + C) / 3
S1 = (P x 2) - H
S2 = P - (H - L) = P - (R1 - S1)
Here, "S" represents the support levels, "R" the resistance levels and "P" the pivot point. High, low and close are represented by the "H", "L" and "C" respectively. Note that the high, low and close in 24-hour markets (such as currencies) are often calculated using New York closing time (4pm EST) on a 24-hour cycle. Limited markets (such as the NYSE) simply use the high, low and close from the day's standard trading hours. Some good sources for daily pivot numbers is FX Street http://m.fxstreet.com/pairs/ (by clicking your pair of choice to view the day's pivot levels for that pair) and Global View http://www.global-view.com/forex-tra.../chartpts.html.
RULES.
When using Pivots Points and S/R Levels, the rules are simple:
1. BUY only if Price is ABOVE the Pivot Level. SELL only if Price is BELOW the Pivot Level.
2. Use S/R Levels for TAKE PROFIT opportunies.
3. Never counter-trend trade.
A. Entry's should be above or below the pivot.
B. Exit's and Take Profits orders should be the closest S/R Levels.
C. Protective Stop Loss orders are always the Pivot Level.
NOTES.
Different instruments trade differently. Important note that must be considered when trading pivots. Charts are a tool-set that should be consider optional. This is a pure price action strategy. The most important day-to-day aspect that must be remembered is, what price is the daily pivot and which way is the market currently heading? If price is above the pivot level, buy until it reaches a S/R Level. If price is below the pivot level, Sell until it reaches a S/r Level. Trading done simple!
Keep your daily expectation modest and never counter-trend trade. Pivots are all about keeping you on the right side of the trade and in helping you follow the daily trend. Keep realistic expectations in that this is not a get rich quick strategy. It is an easily, implemented wealth building strategy.
Example.
Date: 28th of July
Chart: Eur/Gbp
Pivot: 0.8644
Price Action: Below the Pivot which indicates a SELL option
Take Profit: S/R Level 0.601
Outcome: 40pip profit was made for the day
Update: in the near future I will be discussing Pivot counter-trend trading possiblilities and downfalls.
