So far we have discussed about pivot point levels and ways of calculating pivot points, we also observed the differences and examples using each method. In summary Below are some easy-to-remember tips that will guide you to make smart pivot point trading decisions:
Pivot points are extremely popular with traders, they are used to spot direction, probable reversal points and potential support and resistance levels.
Pivot points are calculated to determine levels in which the sentiment of the market could change from bullish to bearish, and vice-versa.
There are four main ways to calculate for pivot points:
Standard
Woodie
Camarilla
Fibonacci
Because of the fluctuations that many currency pairs does in forex between these levels most of the time, which cause price ranging between R1 and S1, pivot point can be highly effective and useful. Pivot points can be used by range, breakout, and trend traders.
Range-bound traders will enter a buy order near identified levels of support and a sell order when the pair approaches resistance.
Pivot points also allow breakout traders to recognize key levels that need to be broken for a move to qualify as a powerful momentum move.
The sentiment (or trend) traders use pivot points to help determine the bullishness or bearishness of a currency pair.
The clarity of pivot points definitely makes them a useful tool to add to your trading toolbox. It also allows you to see possible areas that are likely to cause price movement. Youll become more in sync and current with market movements and make better trading decisions.
But Using pivot point analysis only is not always enough. Learn to use pivot points along with other technical analysis tools such as candlestick patterns, MACD crossover, moving averages crossovers, the Stochastic, RSI, etc.
The higher the confirmation, the greater your probability of a successful trade!
