Step-by-step guide and strategy on using Pivot Points in Forex
In general a trading area around R1, S1 and Pivot Point itself is the easiest and most predictable area to trade in.
As we know from the theory once a level of support is broken it becomes a level of resistance. Same for resistance, once broken — becomes support.
So, here come other Pivot levels such as S2 and R2.
While holding a position, it is a common rule: if the price didn't "see" the first support / resistance, e.g. goes quickly through it without noticing / stopping, do not exit the trade, set your profit target at R2 because the market shows strength and is capable to push the price further to the next level. Typically, R2 becomes the highest point of the trading day.
However, R2 and S2 are not the ceiling for the price to stop at. During well trending market periods the price can move past those levels with no troubles at all.
If the market opens or trades at the extremes R2 or S2, the price will show a tendency to trade back toward the Pivot Point or even stop and go sideways. Try to avoid buying at R2 or selling at S2.
That's basically the way how traders use Pivot points in Forex trading.
Would you like to find out what happened later on the chart where we waited for clarification last time?
That day was very good, we made some healthy profits.
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