This is one of my experience in my daily trading activity, and I am very glad to share this article for readers. I hope that this article will inspire you in your trading activity and then help you to make money online by forex trading. I am especially share about the benefit of using pivot point analysis.
Pivot Point is a price level that is between support and resistance levels and is one method of technical analysis is used to identify areas where the price movement will be amended. Many analysts use pivot point formulation in forex to find the level of support and resistance levels and then use it to place an order (Buy / Sell). So before determining support and resistance levels, you should already know the price of the pivot point.
Level of pivot point is resulted from the sum of the price position in the period of the previous day, which consisted of the opening price (Open) where are consist of highest price (High), lowest price (Low), and closing price (Close) and then divided by the number of the price positions, that is 4 (Open, High, Low, Close). The easiest way to know the positions of the price of the previous day period are: open your chart, or press F2 on the keyboard of your computer, then click on the currency you trade, and then click Daily periods (D1).
picture above shows that the EURUSD position in the period 05.08.2015 00:00 Open is the price: 1.1267, High: 1.1289, Low: 1.1178, Close: 1.1210. How to calculate the pivot points, support and resistance are:
Pivot Point: (Open + High + Low + Close) / 4 = (1.1267 + 1.1289 + 1.1178 + 1.1210) / 4 = 1.1236
Resistance 1: (2 x pivot point) - Low = (2 x 1.1236) - 1.1178 = 1.1294
Resistance 2: pivot point + (High - Low) = 1.1236 - (1.1289 - 1.1178) = 1.1347
Support 1 (2 x pivot point) - High = (2 x 1.1236) - 1.1289 = 1.1183
Support 2: pivot point - (High - Low) = 1.1236 - (1.1289 - 1.1178) = 1.1125
Another formula to calculate the pivot point is (High + Low + Close) / 3
Overall benefits of the pivot point in Forex trading are that you do not lose your way in determining the target point and entry point. The key point in determining the target point or entry point is the support and resistance lines. Resistance is conditioned as a boundary line or the psychology of price movements that are rising (bullish), and the support was conditioned as a boundary line or the psychology of price movements that are down (bearish).
While the pivot point is typically used to determine the direction of future prices. If the open price is above the pivot point, it is predicted prices will move higher (bullish), if the open price is below the pivot points, the predicted price will move down (bearish).
From the descriptions above, of course, you already know how to use pivot point. However, the pivot point just as a way to predict the boundaries of price movement and not as a way to make sure where prices will move. To better understand the pivot points, support and resistance, I recommend that you practice directly through your chart.
The basic concept for applying trading is the main objective which is not always want to win every time, but rather on maximizing profits "- (Jeff Yass).
Trading is not difficult, what is difficult is Discipline and commitment are required in trading activity (Michael Miligan).
Hopefully this article useful to you