Step-by-step guide and strategy on using Pivot Points in Forex
Tricks/Techniques in Pivot Point TradingNow, knowing the basics we can move onto Forex tricks and tips we prepared for you to enhance your trading success with Pivots.
Pivot Trick 1— early bird gets all worms. Early hours are where all support/resistance levels are tested. Later the market usually makes adjustments only. Early hours start from the first minutes of the new day! Sleep in and you've missed it.
Pivot Trick 2— As we promised — Timing.
London time and New York Time, think global. While we use New York time (EST) other traders are trading in other time zones. It is worth considering at least London market — one of the biggest currency markets. They use GMT. Therefore, their Pivots are calculated 5 hours earlier than ours, means they use different data and price ranges. Wouldn't it be helpful updating Pivots according to their time and see enhanced picture of the market? Yes, it would pay off!
While we use midnight-to-midnight Eastern Standard Time, some traders use New York closing time of 5:00 pm EST as the previous day's close.
We'd like to bring another useful point as an update to this page:
Pivot Trick 2A— while using midnight pivots all day long, at 5 pm EST if you're still trading, calculate new pivots from 5:00pm to 5:00pm EST. They'll provide a fresh look on the market which will be valid till midnight when you recalculate new pivots according to midnight rules.
Feel confused after so many suggestions about timing? Then start it simple: begin with midnight EST Pivots only. Trade with those rules for some time. Then try out 5:00pm EST Pivots, see which ones work better for the strategy you trade. Add new rules only when you're comfortable with basic Pivots timing.
Learn basics about timing in Forex at ForexMarketHours.com.
Pivot Trick 3— in case you prefer quick entries close to Pivot levels and like to use limit orders for that, keep in mind that setting positions too close to any Pivot level may put you in the situation when the order is triggered but the price eventually closes on the other side and moves against you. That's why we don't use any preset orders; we wait for the bounce-off or break-through to happen and then manually open new trade at current market price.
Pivot Trick 4— when Pivot Point is passed / crossed, price will in 95% of the cases hit first Support or Resistance level, what does it mean? — Sure fire profits. If you choose to take your profits at R1 or S1 level you will be winning it day after day! On the other hand, you may often see that during some other days your were exiting too early as the price moved further in your direction after you exited. It's up to you: opting for predictable profits or going for bigger dreams.
Pivot Trick 5— mid-lines can be used for setting stop loss orders. Going Long at Pivot Point, set your stop loss order not right below the Pivot Point but below the mid-point between the Pivot Point and S1.
This will give you a better chance to survive if Pivot Point gets "poked".
Pivot Trick 6— Use additional studies: technical indicators that show trend direction, trend lines, Fibonacci levels, MACD indicator, other studies that you are comfortable with to confirm your entries and exits.
Pivot Trick 7— if during the day you spot congestion around one of the Pivot levels, use it to your advantage: set entry order on the break out of this congestion and just over the Pivot level which price is trying to concur.
Pivot Tip 8— if the market tried, but wasn't strong enough to reach R1 / S1 level and is already attacking Pivot Point to pull through on to the other side, be ready for trend change. Give the price chance to confirm its intentions by actually closing on the other side of the Pivot Point and shoot for the profits again setting the target at the first support/resistance level.
Pivot Tip 9— we keep on saying that entering near the Pivot Point and then setting targets and the first support/resistance level is the easiest and the safest way to get sure profits. What can help you to pick much better trades is looking at the amount of pips you can earn in each trade. Simply by analyzing the distance from the point you plan to enter to the next S1/R1 level you can tell if the trade worth attempting. If the amount of pips is very small it is probably not worth trading. This way you save yourself from taking unnecessary risks of losing money on a little-to-nothing promising trades.
Pivot Tip 10— by the time price reaches R2, R3 or S2, S3 the market will already be overbought or oversold and these levels should be used for exits rather than entries.
Pivot Tip 11— How to calculate pivot points for Monday? To calculate Pivot points for Monday we use time from midnight EST on Friday to midnight EST on Sunday.
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