An Introduction to Pivot Points in Trading
Professional traders who are interested in discovering where a currency pair is likely to pivot from its current trajectory and head in another direction often use what is known as pivot points in trading.
They are looking for specifc areas of support or resistance to buy or sell the currency pair so that they can make a proft when it changes course. Doing so allows them to take advantage of the moves that occur in the market as they are happening.
Pivot points in trading are very objective, and that is what makes some traders so interested in them. Most of
the other indicators we discuss are fnely tuned and mathematical, and pivot points are no different.
Range-bound traders apply pivot points to fnd reversal points. They see pivot points as areas where they can put their buy or sell orders.
Breakout forex traders employ pivot points to identify key levels that need to be broken for a move to be categorized as a real breakout.
Charting pivot points is very similar to charting Fibonacci levels. Since so many people are staring at those
levels, they almost become self-fulflling.
The main distinction between the two is that with Fibonacci, there is still some subjectivity included in picking
Swing Highs and Swing Lows.
With pivot points, traders typically use an identical method for estimating them.
Getting used to using pivot points is simple. Just know the following terminology:
1. PP = Pivot Point.
2. S = Support
3. R = Resistance
Below you’ll fnd an example of pivot points plotted in orange on a chart:
In the next couple of articles, we’ll talk a bit about how to properly calculate pivot levels, different types of pivot points, and how to add them to your charts.
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