Why Use Pivot Points In Forex Trading?
Trading Forex with pivot points is so accurate that it allows traders to evaluate the overall market flow.
This tool is used to determine potential support/resistance levels and directional movement. As a result, literate traders get to estimate the period’s high and low. Pivot points help to:
Pivot point calculator is one of the substantial tools that help forex traders and brokers with advantageous support to mitigate risk. It allows them with potential resistance levels in forex markets. Two key reference points; support & resistance, help them evaluate when is the right time to enter and exit the market. This way, traders are in a better position to place stops and earn high profits.
However, it is observed that individuals who are in trading business attempt to divert too much of their focus on technical indicators. Like MACD (moving average convergence divergence) and RSI (relative strength index).
These indicators are reasonably useful, but they don’t happen to identify a point that defines risk. And logically, unknown risk can lead to margin calls. Hence, for FX traders, it is significant to work on calculated risk. This way, they can positively improve the odds of success over the long haul.
Pivot points are best-suited to assess the direction of the market. Using this tool, forex traders can significantly identify price trends. They get to learn about the period’s high, low, and closing numbers to forecast the market. Surprisingly, pivot points can be used with other technical indicators to examine the sudden and massive influx of traders entering the market collectively.
As a result, current market traders can potentially realize the market breakouts, profit opportunities, and use pivot points to enter, exit, and place stop losses. For any time frame, pivot points can be conveniently employed to learn about market trends. For instance, day traders, swing traders, and position traders can significantly make use of this tool.
3 Strategies to Trade With Pivot Points the Right Way
If you are someone new in the FX market with a desire to make the most out of your trading, you need to employ pivot point technical analysis. A pivot point trading strategy will help you mitigate potential risks and maximize profitability. Here are three tactics to consider while using the pivot point tool.
#1: If trading below after first 15-minutes, sell at the market
First and foremost, you need to be an active trader. Keep a check on the market direction. It is sensible on your end to sell at the market when you are trading below the “central pivot point” right after the initial fifteen minutes. You have to suffer a financial loss if you happen to wait too long. Hence, follow the simple trade strategy of 15-minutes. Once the market has started to display a disposition, you can expect to trade below the central pivot point. And, the bearish momentum will continue.
#2: Look for your protective stop loss 5-10 pips directly above the pivot point
Just like you have an entry strategy, you also need to have an ideal plan for your stop loss. For this, you follow the simple rule of 5-10 pips. When there is going an above from the central pivot point, and price happens to break, it means the trend has shifted towards the bullish end. And it is an appropriate time for you to exit any short trades. In addition, for your SL, you should employ a cushion of 5-10 pips above the central point.
#3: Follow partial profit strategies at support 1 and support 2
It is significant to make use of multiple profit strategies while trading with forex. It allows you to use deeper support levels of the market. At 1st pivot point support level, you want to earn some of the profits. Typically, it is recommended that after you have taken your earnings here, you should move your protective loss to B/E (breakeven). Moreover, at the 2nd pivot point, you must think of liquidating your entire position. Without any second thought, go square for the day.