What is pivots and what can do with it
Supports and resistance are great, no doubt. Their only weakness is in the merchant’s subjectivity. There is no precise procedure for plotting support or resistance. While most traders are seen in similar places, but never the same. However, this problem solves completely the pivot point. Pivots help us identify potential levels of support and resistance. If you are not sure yet that you can plot these technical levels well enough, the pivots are a clear choice for you. The pivot point levels in the market perspective identify strong technical levels based on mathematical calculation. And what more? You can even download the indicator. Pivots are somewhat similar to Fibonacci’s return levels. They are also based on a mathematical calculation. The main difference with Fibonacci is also subjectivity. If you use the Fibonacci method, you have to choose the individual swings on which you apply the payback levels, which returns the already mentioned personal view of the trader to the graph.
How do the pivot points arise?
The pivot points can be plotted on your chart by yourself, or you can calculate it. It’s nothing complicated, just know the following three figures:
1. High on the previous day
2. Low the previous day
3 Close the previous day
Everything else is just a mathematical calculation.
How to use pivot points in trade consolidations
The easiest way to use Pivots is just like the SR zone. The more often the market uses the Pivot during the day, the stronger it is. We mean the situation when the Pivot market is turning. Tzn. we expect the bear’s pressure and the support we expect from the buyers. In the picture, the market approached S1 and then returned to the daily pivot and reached the level of R1. The pivot levels so very predict the turn of the market. Of course, we must immediately say that these levels do not work 100% and can not be traded blindly. So buy at each level of support and resist the level of resistance. This would ruin your account very quickly.
That is why we need to adopt the same philosophy as in SR levels. For successful use, the knowledge of candle formations needs to be involved. Inspiration can be found in the Most Profitable Siren Formations. The market tends to move between the pivot levels during the day, so it serves as a great destination for your business. Pivot levels can be used for stoploss and so on. Keep in mind that this chapter is dedicated to using pivots in consolidations. If you want to use it, you should be able to tell when the market is very trendy and when it tends to go sideways.
How to use the pivot points for a breakout
If the Pivot points are similar to the SR levels, then they also determine the potential levels where the market can reach. Most traders use pivot points for breakouts when they speculate that the market will continue in that direction. Traders are waiting for the daily pivot to be thrown in the direction and then placing an order in that direction. Their targets are individual pivotal levels – SR zones.
The use of Pivot Points is therefore clear. Of course, there are countless strategies to trade this method, but that was not the goal of this article. Trading pivot points will be discussed in another article focused on forex strategy.