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Trade
Pivot levels for Forex market
One of the key points in trading is the determination of the size of the potential profit. Most traders are often in doubt about where to close the deal.
Sometimes the desire to take as many points leads to the opposite result: the price comes back, and never reaching the intended trader point, turning, begins to move in the other direction. Thus, the transaction becomes profitable from unprofitable.
To make trading more predictable and to plan every trade, experienced traders draw on charts price levels, thereby mapping out goals. However, these levels are quite subjective, because everyone builds them using their own observations and experience.
More objective from this point of view will be the Fibonacci Levels that are popular among traders. But in this case it is necessary to determine the probable level to which the price will take as it closely relates to. For a more precise definition of potential objectives, you can use the pivot levels.
Meet pivot levels
Pivot levels is a mathematical model based on the concept of "pivot point" - the pivot point, which allows to predict the direction of price movement. It is used as an effective indicator in different markets.
These levels help to determine the direction of the market, but the limits of the range within which the price moves. They were first proposed by Henry Wheeler chase in the 30 years of the last century, after which the levels have been an integral part of many trading strategies.
Indicator Pivot levels You can free download here:
The basis for calculation is the presence of five important levels that are determined based on the values of the maximum price, its minimum and the closing. Using the proposed formula, it is possible to find directly the turning point, and two points of support and two of resistance.
Pivot level (P) = (high+Low+Close)/3
Resistance 1 (R1) = (P x 2) - L
Resistance 2 (R2) = P + H – L
Support 1 (S1) = (P x 2) – H
Support 2 (S2) = P – H + L
Pivot on the chart
The levels can be calculated for any date range, for which you need to take a value of high, low and close prices for a specific timeframe. Additionally calculated levels R3 S3.
How they work pivot level
As practice shows, the pivot levels work well in trending markets. Level G serves as a kind of "center" around which revolves the price. When it is above – market reign is bullish, and when below – bearish. If there is a clear trend, the price will go R to first, and then the second support or to the first, then the second resistance.
Forex trading with pivot levels
Knowing this, the trader can take profits near the found lines. Pivot by themselves quite informative, but often they are combined with other prediction methods to obtain the most accurate data.
For example, they complement the moving averages or Fibonacci Levels. It should be noted that in the case when price comes to the levels of R2, R3 or S2, S3 the market is oversold or overbought, so you should proceed from the positions and take profits.
These topics will also be useful:
Levels Price Action
Indicators of construction price levels
Trade on pivot
A trading strategy on the pivot levels is divided into several stages.
Determination of the place of the position of prices relative to the level P at the beginning of the range.
The choice of the direction of the trade depending on the prevailing market sentiment.
If the price moves in the desired direction and hit R1/S1 should open a transaction for purchase/sale.
Exit the trade and take profits need in the area of R2/S2. If the market continues to move in the selected direction and breaks these levels, the portion of the position to write, expecting further profit growth to the borders of R3/S3.
If the price breaks R1/S1, we can consider open positions at the rebound.
Looking for the purpose of pivot levels
The advantages of pivot levels
Trade on the pivot levels is one of the few strategies which is used in the market for quite a long time. The main advantages are:
Objectivity. For calculation are used data price chart. In the beginning of the new interval calculation is carried out again, allowing you to adjust the target.
Easy. To trade by using this indicator can be anyone, it does not need any special knowledge or experience.
Reliability. Trading technique is proven and throughout the period of use showed good results.
Disadvantages
Along with the advantages to trade on the pivot levels, there are a number of disadvantages.
The price may cross the level G, so to determine the dominant trend can be difficult. To minimize risks, it is recommended to recalculate the boundaries of the reversal at the opening of each trading session.
On different time frames the position of the levels may differ, so it is necessary to focus on the time interval that is used for transactions.
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| Category: Forex | Added by: (30.10.2017)
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| Views: 320
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