Professional traders who are interested in discovering where a currency pair is likely to pivot from its current trajectory and head in another direction often use what are known as pivot points to do this. They are looking for specific areas of support or resistance to buy or sell the currency pair so that they can make a profit when it changes course. Doing so allows them to take advantage of the moves that occur in the market as they are happening.
Pivot points are very objective, and that is what makes some traders so interested in them. Most of the other indicators that we discuss are very finely-tuned and mathematical, and pivot points are no different.
Range-bound traders apply pivot points to find reversal points. They see pivot points as areas where they can put their buy or sell orders.
Breakout forex traders employ pivot points to identify key levels that need to be broken for a move to be categorized as a real breakout.
Charting pivot points is very similar to charting Fibonacci levels. Since so many people are staring at those levels, they almost become self-fulfilling.
The main distinction between the two is that with Fibonacci, there is still some subjectivity included in picking Swing Highs and Swing Lows. With pivot points, traders typically use an identical method for estimating them.
Getting used to using pivot points is simple. Just know the following lingo:
1. PP = Pivot Point.
2. S = Support
3. R = Resistance
Below you’ll find an example of pivot points plotted in orange on a chart:
In the next couple articles, we’ll talk a bit about how to properly calculate pivot levels, different types of pivot points and how to add them to your charts.
Disclaimer: All information provided here is intended solely for study purposes related to trading financial markets and does not serve in any way as a specific investment recommendation, business recommendation, investment opportunity, analysis, or similar general recommendation regarding the trading of investment instruments. The content, in its entirety or parts, is the sole opinion of SurgeTrader and is intended for educational purposes only. The historical results and/or track record does not imply that the same progress is replicable and does not guarantee profits or future profitable trading records or any promises whatsoever. Trading in financial markets is a high-risk activity and it is advised not to risk more than one can afford to lose.