How To Trade Pivots
Trading Pivots on the trading chart is a good way Forex and Volatility Index traders make profits daily.
Basically, you can calculate pivot points manually with Support and Resistance levels.
However, softwares, indicators, Expert Advisors and scripts are now available for traders.
With these tools, one can easily find the Pivot points on the chart.
Calculation of Pivot Point:
In order to calculate pivot point, follow the steps below:
Pivot point (PP) = (High + Low + Close) / 3
Also calculate the Support and Resistance levels by using the steps below:
However, for the first level Support and Resistance, same as Support 1 and Resistance 1:
First resistance (R1) = (2 x PP) – Low price
First support (S1) = (2 x PP) – High price
Technically, for second level of Support and Resistance, same as Support 2 and Resistance 2:
Second resistance (R2) = PP + (High price– Low price)
Second support (S2) = PP – (High price – Low price)
Moreover, for third level of Support and Resistance, same as Support 3 and Resistance 3:
Third resistance (R3) = High price + 2(PP – Low price)
Third support (S3) = Low price– 2(High price – PP)
You may as well use Microsoft Excel work sheet, to easily program these steps for your every day use.
Do find below the image of Pivot Point computation excel sheet for Volatility 75 Index.
Kindly find below the image of Pivot Point computation excel sheet for EURUSD.
Do find below the image of Pivot Point computation excel sheet for XAUUSD.
Trading The Support Levels:
Support zones are floor levels or base levels where price is expected to reach and bounce or rise up.
Some Support levels, such as Support 1, Support 2 and Support 3 forms below the Pivot Point level.
A break and close of price below Support level 1 will give way to Support level 2.
At this point, Support level 1 will now become a Resistance level to Support level 2.
While the break and close below Support level 2 will give way to Support level 3.
At this point, Support level 2 will now become a resistance level to Support level 3.
Trading The Resistance Levels:
Resistance zones are the ceiling or top levels where price is expected to reach and fall or slide.
Some Resistance levels, such as Resistance 1, Resistance 2 and Resistance3 forms above the Pivot Point level.
A break and close of price above Resistance level 1 will give way to Resistance level 2.
At this point, Resistance level 1 will now become a Support level to Resistance level 2.
While a break and close above Resistance level 2 will give way to an upward movement of price to Resistance level 3.
At this point, Resistance level 2 will now become a support level to Resistance level 3.
Basically, price will normally continue in the direction it laps on the Pivot point.
The bullish price movement will continue if a Bullish candlestick opens below and closes above a pivot line.
See image below.
CANDLESTICK PATTERNS AROUND PIVOT LINE:
The nature of candlestick pattern formation around Pivot line is a pointer to price direction.
The formation of a Bullish candlestick bar across the pivot line.
This indicates that the price may go up for some time.
Formation of a Bearish candlestick Pin bar across the pivot line.
This indicates that the price may go down for some time.
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