Pivot Points - Online currency trading

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Pivot points are used by traders as a predictive indicator and denote levels of technical significance. When used in conjunction with other technical indicators such as support and resistance or Fibonacci, pivot points can be an effective trading tool. Pivot points are calculated using the high, low and close prices of a previous day, week or month. Three different levels of support and resistance are calculated above and below the pivot point. The three levels of resistance are referred to as R1, R2, and R3 while the three levels of support are referred to as S1, S2, and S3. When the current price is trading above the daily pivot point, this serves as an indication to initiate long positions. Conversely, when the current price is trading below the daily pivot point, this serves as an indication to initiate short positions. The support and resistance levels are used primarily as trade exits. For example, if the market price breaks above the pivot point, R1 and R2 may be used as trade targets. Should the market move to R3, traders may consider exiting the long position and even reversing the position if other technical indicators show a strong reversal trend.

 

There's a great free ebook on this subject here - How To Really Use Pivots eBook « Forex Useful

 

That was good to read and know. Every trader must know it.

 

When you trade the forex, you will need to look out for possible support and resistance, you would need reference points with which you could know where to place stops, take profits as well as enter the market. Pivot points are well used to produce possible support and resistance levels as well. This would now help you reduce your risk exposure. Well, it is possible to say that combining pivots points help better than most common technical tools.

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