How to trade using “Pivot Point”?

The “pivot points” are considered to be the major levels of “support and resistance” where you are likely to see repulsion of price. They are very useful tools that use the previous bars' highs, lows and closings to project “support and resistanc”e levels for future bars. . “Pivot Point” Calculation informs you how to:

• Predict price ranges in a given time period.

• Use the pivot point as a moving average.

• Build a trading system based on the pivot point. 

How “Pivot Point” consists of:

Resistance 3 (R3)

Resistance 2 (R2)

Resistance 1 (R1)

Pivot Point (PP)

Support 1 (S1)

Support 2 (S2)

Support 3 (S3)

The “pivot points” can serve as a good entry and exit indicator. There are different ways you can trade with “pivot point” depending on the type of traders you are.

Do not worry about the calculation and the formula as there are numerous pivot calculators out there that you can use to help you calculate all the levels.

In this post today, I will go through the step on how you can set up “pivot points” on your chart.

R3 = High + 2 x (PP – Low) 

R2 = PP + (High – Low) = PP + (R1 – S1) 

R1 = (PP x 2) – Low 

PP = (High + Low + Close) / 3 S1 = (PP x 2) – High S2 = PP – (High – Low) = PP – (R1 – S1) S3 = Low – 2 x (High – PP)

Step 1: Go to your Hourly Chart (Each candle represent an hour)

Step 2: Select a time that you are trading and then back date 24 hours (Example: if you are trading at 30th April 2012 7am , you will also need the data on the 1st May 2012 6am.

Hourly Chart Setup

 Step 3: Place your cursor on the  30th April 2012 7am candle and record down the OPEN (O) value

Step 4: Look for the highest candle within the  30th April 2012 7am  to   1st May 2012 6am   and then place your cursor on the candle to record the highest (H) value

Step 5: Look for the lowest candle within the same period as step 4 and then place your cursor on the candle to record the lowest (L) value.

Step 6: Place your cursor on the  1st May 2012 6am  candle to record the CLOSE (C) which is the closed value for the day.

Step 7: Go to your “pivot point” calculator and then enter the OHLC value to calculate the pivot levels. To download “pivot point” calculator http://www.traderknowledge.com/trading/pivot-point-calculator-free-download/

What is Technical Forex Analysis?
Trend Line at Forex Market
“Pivot Point” Calculation
Understanding "Support" and "Resistance"
What is Forex indicator? 

How to download indicator at Metatrader?