WHAT IS FOREX PIVOT POINT?
According to investopedia.com "pivot points" is defined as "A set of indicators developed by floor traders in the commodities markets to determine potential turning points, also known as "pivots". Forex pivot points are calculated to determine levels in which the sentiment of the market could change from "bullish" to "bearish." Currency traders see pivot points as markers of support and resistance."
I will define the "forex pivot points" as "The levels in which the sentiment of the forex traders might be change from bearish to bullish or from bullish to bearish." These are all about the theoretical definition of forex pivot points.
From my simple understanding I will say, forex pivot points are the central points from which the price level of a currency pair moves up and down. At different price levels above and below the pivot points support and resistance levels appear.
In pivot point analysis,the resistance levels are placed above the pivot point and the support levels are placed below the pivot point. Both the range traders and breakout traders can take the advantage from the pivot point analysis. In the above image S represents support and the R represent resistance.
Range traders generally expect a bullish trend when the price reaches at the support levels and a bearish trend when the price reaches the resistance levels.
Breakout traders place buy orders when the resistance levels are broken and place sell orders when the support levels are broken.
Even the sentiment analysis is also possible with pivot point analysis. Later we will discuss about measuring the market sentiment with pivot point analysis.
The strategy is not that simple?
Pivot point is primarily a part of technical analysis. It is never be alone sufficient for a successful forex trading strategy. Fundamental and sentimental factors also need to be considered. Pivot point analysis simply a way to enrich your trading strategy.
Never consider pivot point analysis as an accurate technical analysis tool. Both breakouts traders and range traders face problems with this tool. Sometimes a breakouts of S1(Support-1) may not mean that the trend will reach S2 (Support-2).
If you have any questions, please drop it into the comment section below. Besides, if you want to receive the next post from me, you can subscribe with your email.
In pivot point analysis,the resistance levels are placed above the pivot point and the support levels are placed below the pivot point. Both the range traders and breakout traders can take the advantage from the pivot point analysis. In the above image S represents support and the R represent resistance.
Range traders generally expect a bullish trend when the price reaches at the support levels and a bearish trend when the price reaches the resistance levels.
Breakout traders place buy orders when the resistance levels are broken and place sell orders when the support levels are broken.
Even the sentiment analysis is also possible with pivot point analysis. Later we will discuss about measuring the market sentiment with pivot point analysis.
The strategy is not that simple?
Pivot point is primarily a part of technical analysis. It is never be alone sufficient for a successful forex trading strategy. Fundamental and sentimental factors also need to be considered. Pivot point analysis simply a way to enrich your trading strategy.
Never consider pivot point analysis as an accurate technical analysis tool. Both breakouts traders and range traders face problems with this tool. Sometimes a breakouts of S1(Support-1) may not mean that the trend will reach S2 (Support-2).
If you have any questions, please drop it into the comment section below. Besides, if you want to receive the next post from me, you can subscribe with your email.
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