Most traders who use Pivot Points are intraday traders. Pivot Points or Pivot Levels are nothing but some support and resistance levels that you can calculate and plot on your charts very easily. Even in the forex market which is a 24 hours market we have high, low and close prices for each day. The easiest way to find the high, low and close prices of the previous day is checking the previous day candlestick on the daily chart.
The Language of Japanese Candlesticks. You can plot the Pivot Points levels on smaller time frames like one hour or five minutes chart. But as I explained at the beginning of this article, it is good to have them on your charts even if your trading system is not based on the Pivot Points. The first and most important Pivot level is the Pivot Point which is the average of the high, low and close price of the previous day:. In a trading day, if price opens under this level, it means it has a stronger tendency to go down and Bears are stronger.
If the price opens above the Pivot Level, it means Bulls are stronger and we can take a long buy position. All other levels may work as support and resistance and so we have to be careful when price reaches them. Those who use Pivot Levels to trade, would go long at the beginning of the day but for me it will be a little different. I will not take any position just because the price is opened below or above the main Pivot Level.
Then I will have an eye on the Pivot Levels to close my trades on time before I lose my profit. I consider this rule that if price is opened above the main Pivot Level, it may go up and visa versa.
For example in the above example, I would consider that price was opened above the Pivot Level and it had a stronger tendency to go up. The never talk about their trading strategy anywhere. I mean Pivot Points can be used mainly for intraday trading. Before you read the rest of this article This eBook shows you the shortest way towards wealth and financial freedom: Article by LuckScout Team.
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