This term first appeared in the last century. If we drive into the Google translator, "Pivot", we will get the word pivot in the translation. And the phrase "Pivot Point" is translated from English as a fulcrum.
Graph with levels plotted on it Pivot
The main prerequisite for creating the Pivot levels indicator is the assumption that yesterday's price behavior has a significant impact on its today's movement. Therefore, initially the Pivot levels were built based on the prices of the previous day in order to predict the price movement on the current day. Today, these levels are built on any (although it is believed that they give the best results on charts with a period of D1 and above).
Pivot levels are potential levels, calculated by the values of the previous candle on the price chart (high and low prices of the candle (High and Low) and its closing price (Close)). It is assumed that with a high degree of probability the price will react to these levels as well as to the well-known support and resistance levels.
Pivot levels are considered to be the strongest if they coincide on different timeframes. That is, for example, if the Pivot level calculated for the D1 timeframe coincided with one of the levels calculated for the chart with the W1 period, then this level is potentially much stronger.
To confirm the significance of the Pivot level, look for it on different timeframes
First, the central Pivot level is calculated, and then additional levels are calculated on both sides of it. Above it, resistance levels are calculated. Below it, support levels are calculated.
The central Pivot level (Pivot Point) is calculated based on the results of the previous trading session, if we are talking about a daily chart. If the chart period differs from D1, then simply by the values of the previous candle (high, low and close prices are used in the calculation). The formula for its calculation is as follows:
PP(Pivot Point)=(High+Low+Close)/3
As you can see, this is nothing more than the arithmetic average of the maximum, minimum and closing prices.
R2=PP+(High-Low)
R3=High+2(PP-Low)
And three levels of support, laid down from the Pivot Point:
S2=PP-(High-Low)
S3=Low-2(High-PP)
Today on the net you can find a lot online calculators to calculate Pivot levels. Here, for example, is the calculator of one well-known European broker:
But the most important rule is that the Pivot levels are relevant only for the candle following the one on the basis of which they were built. Many traders misuse these levels. The most convenient and, importantly, the correct method of using them would be the following:
The essence of using the Pivot Point is the same as in the case of the usual support and resistance lines. They can be used both for range trading (between levels) and for level breakout trading.
In the case of range trading, a bet is made that the level will not be broken and the price will rebound from it. In trading on a level breakdown, on the contrary, a strong price movement is expected after the level in question is broken.
When using any of these strategies, it will never be superfluous to verify the significance of the traded level by finding it on the chart of two (or even more) timeframes at the same time.
And you can combine these two strategies into one, and trade both on the breakdown of the level and in the range at the same time. The bet here is that the price will most likely bounce off the next level, but if it suddenly breaks through it, then the result of this breakdown will be a fairly strong price movement.
That is, we need to be ready for any of these two scenarios. You can sit at the monitor and wait until the price either bounces off the level or breaks it. Or you can use such a simple and effective trader's tool as pending orders. Sitting and “waiting by the sea for the weather” is an extremely boring and inefficient activity (in terms of huge time costs for it). Therefore, in my trading, of course, I use exclusively the second option, which I advise you to do as well.
Pending orders fall into two main categories:
Limit orders involve making a deal (buy or sell) at a price more profitable than the current one, and stop orders, respectively, suggest making a deal at a price less profitable than the current one.
Don't be confused by the phrases more favorable and less favorable price, they have absolutely nothing to do with the final result of the transaction. They are used solely to indicate the opening price of a pending order relative to the current price.
For example, to open a pending order to buy (Buy), the price below its current value will be more profitable, and the price above it will be less profitable. current level. And for opening a pending order to sell (Sell), on the contrary, the price above the current value is more profitable and the price below the current one is less profitable.
Thus, a pending order to buy Buy Limit involves entering a position at a price lower than the current one. At the same time, the trader expects that soon after reaching the specified point of opening the order, the price will turn around and go up.
A pending Buy Stop order is placed at a price that exceeds its current value. In this case, the trader's calculation is based on the fact that, having reached a certain value (specified in the order opening price), the price will continue to grow further.
The situation is similar with pending sell orders. Sell Limit is placed at a price higher than the current one, expecting that, having reached this value, the price will turn around and go down. And Sell Stop is set below the current price level, in anticipation of such a scenario in which the price, having fallen to a certain level, will break through it and continue its downward movement.
We figured out what pending orders are (if you have any questions, you can get additional information on this issue by clicking on the appropriate links given above in the text). Now let's consider the strategy of trading by Pivot levels, with their use. Take a look at the picture below.
As you can see, at the time of placing orders, the price is between the PP and R1 levels. There are four possible scenarios for the development of events:
For each of these options, we set a separate pending order, necessarily accompanying it with additional orders to limit losses (Stop Loss) and take profits (Take Profit). As can be seen from the above figure, we take profit at the next level in the direction of the transaction. And losses are limited to a small distance (exceeding the current volatility) from the opening level.
As the further development of events showed, the price went down. At the same time, two pending orders Buy Limit at the level of 1.14500 (indicated by number 2 in the figure) and Sell Stop at the level of 1.14270 (indicated by number 4) worked.
The first of them was closed by Stop Loss approximately at the level of 1.14270, and the other – by Take Profit at the level of 1.13390. At the same time, the trader's loss on the first transaction was: 1.14500 - 1.14270 = 0.0023 (or 230 points), and his profit on the second transaction was: 1.14270 - 1.13390 = 0.00880 (or 880 points). Well, the net profit as a result of applying this strategy was: 880 - 230 = 650 points.
** This refers to the candle that opened immediately after the candle on the basis of which the Pivot levels were calculated. .
Whatever trading strategy Whatever the trader used, he should always take into account horizontal zones where the price can receive support or meet resistance. It is important to understand that all market participants pay attention to these levels, and therefore, due to the psychological factor, they become even stronger. As the price approaches the resistance area, longists will want to cover positions, and shortists will try to enter, which will lead to increased bearish pressure and at least will not allow them to take a significant level on the first attempt. However, it is difficult to mark up levels on your own, since this process is very subjective. This is where knowledge of Pivot pivot points comes to the rescue - the same support and resistance levels that are calculated using an exact mathematical algorithm.
The significance of Pivot Points, which in English are called Pivot Points, has already been appreciated by a huge army of traders, so everyone who seriously uses technical analysis in Forex and other financial markets must be guided by them in their trading. Moreover, in order not to do the calculations yourself, you can take ready-made results for Pivot points from Investing.com or TradingView.
When predicting price movement, traders use different approaches. Someone focuses on fundamental statistics, someone likes to listen to their intuition, but the most rational group of speculators is looking for mathematical patterns in the run of quotes that tend to repeat themselves. The mathematician Henry Chase, who, at the dawn of technical analysis at the beginning of the 20th century, defined Pivot points, each time calculated taking into account three main parameters of price behavior over the previous trading day, can be attributed to the latter group:
Pivot points got their name because near them the price changes its direction with a high degree of probability, since pivot is translated from English as a reversal. Accordingly, it is correct to translate pivot points, not as “pivot points”, but literally as “pivot points”. But over time, this designation has become a household name, and therefore today all traders are familiar with the result of Chase's work under this name.
Since the appearance of pivot points, all major companies began to use them in their analysis. financial institutions: banks, hedge funds and other major participants in financial markets. Over time, they were joined by traders, for whom the use of Pivot Points is especially useful during intraday trading, where they act as excellent support and resistance levels, and at the same time show where prices are more likely to move - up or down. Some traders even use them for .
Some traders, usually beginners, have expressed doubts about whether pivot points can be used today. After all, they appeared quite a long time ago and were originally created for the stock market, but you need to apply them today on foreign exchange market, which is very peculiar and often variable. Beginners should be reassured by saying that Pivot Points are still relevant, and every trader is obliged to use the benefits that they provide. Moreover, now it is not necessary to calculate them manually, as it was before, but you can take ready-made results from an investment site or a trading view.
Pivot points were originally calculated using a single algorithm proposed by their creator. But subsequently, traders and analysts made many attempts to refine the calculation method, making it more efficient. This is how different types of Pivot Points appeared:
It is worth noting that there is no very big difference in practice between the individual types of Pivots.
The easiest way is to look at Pivot points for Investing in the section Technical analysis - Pivot points. There are separate varieties that can be compared with each other, and the trader is free to choose the time period for which he needs Pivot Points.
Having chosen suitable price marks, you need to independently draw horizontal levels through them on the chart in your trading terminal. When choosing a time interval, you need to remember that the higher it is, the more significant will be the role played by the applied levels.
To understand how to use Pivot Points in trading, you must first understand what you need to consider in order to be successful:
As for the last point, here you need to be guided by the following recommendations.
For example, below is a graph currency pair EUR/USD with H4 timeframe and Pivot points plotted on it, calculated based on the results of the previous trading week.
Here you can see that the market opened above the central Pivot Points, as a result of which the trader should consider the trend upward and take into work only buy transactions, as the least risky ones. This conclusion was subsequently confirmed by a confident upward movement of the price.
Having determined where the market is most likely to move, you need to pay attention to R1, R2, R3, as well as S1, S2, S3. So, a trader has Pivot points, how to work with them? Yes, it's very simple, just like with the usual resistance/support levels.
In the above example, you can see that the market opened above the axial line, which means that it is worth waiting for the development of an uptrend. Therefore, the trader waits and sees that the price has approached the R1 level. There can be both a breakdown and a reversal. That is, you have to wait patiently.
As you can see, the price broke through R1 and then rolled back to it. According to the breakout trading rules, at this moment the trader would have to put a Buy Stop pending above the High point of the candle that rolled back to R1 after the level was broken.
Thus, the trader reinsures himself. If the breakdown was false, then the price will turn around and fly down without hitting the pending order. But if the breakdown was true, then the price will continue its upward movement after the correction, which happened next.
How to work after opening a deal? First you need to deal with the setting of a protective stop loss. There are two options here:
As for take profit, it is best to close in parts. Half of the working volume must be reset when the price approaches R2, and the rest when it reaches R3. At the same time, when the first take on R2 is triggered, you need to move the stop loss to the breakeven level for the remaining half.
It should be understood that the achievement of R2 and R3 usually occurs against the backdrop of a build-up of strong overbought, and S2 and S3, respectively, on oversold. Therefore, there is a high probability of a reversal near these levels, as a result of which moving the stop to breakeven is a useful measure that will save you from unjustified losses, but will allow you to sit out the trade and get more profit if the trend continues. In the considered example, the price went further up and the take profit on R3 was reached.
When working with Pivot Points, you should also take into account the volatility of the selected asset in order to determine how much margin it has left after the trader has opened a trade. You can determine this parameter using the ATR indicator.
In the example considered, ATR with a period of 120 is used. Why this number? In this case, ATR is placed on a daily chart to determine what was the average value of the daily range over the past six months, since there are 20 trading days in a month, and 6 months multiplied by 20, it turns out 120. Six months is a fairly serious sample that allows you to count on the reliability of the obtained values.
In this example, from the center line, according to the indicators of ATR 120, we can expect the price to move by 80 points. If you look at the chart, then R2 here is exactly 80 points away from the central Pivot. It is very good when there are such coincidences, showing that it will be easy for the price to reach R2, but it is not always possible to expect that the reserve will coincide with Pivot levels. Therefore, it is necessary to use data on the movement reserve in order not to accidentally trigger a buy signal when the price has no movement reserve to R2 that day.
In the above example, the price broke through R1 and gave good point entry to continue the trend. But what to do if the price failed to break through the level and reversed. In this case, the trader can use the trading strategy of working in the channel, counting on the fact that the price will most likely move within the sideways, limited by the levels S1 and R1.
So, having already understood where to take the Pivot points, how to work with them, where to put the take and stop, we can conclude that Pivot Points are worked out in the same way as the usual resistance and support levels. Therefore, any popular strategies can be used with them. For example, look for reversal candlestick Price Action patterns when the price approaches the levels.
That is, in theory, working with pivots is very simple, but in practice there will always be difficulties, since trading is the ability to work out general patterns and you should not look for 100% accuracy of compliance with the conditions here. It often happens that the price is traded right at the Pivot level and "cuts" it in the range or does not reach a certain number of points, turning around. As a result, novice traders often start making the wrong moves, rushing to jump into a trade or, conversely, procrastinating in making a decision.
Therefore, it is always useful to have such a cheat sheet with a description of the mining algorithm at hand:
Pivot point trading is best done on time intervals from H1 and above, although these levels work well on all timeframes.
Below is the 1-hour chart of the AUD/USD currency pair.
The logic of the trader's reasoning after the opening of trading on Monday will be as follows:
Example #2 with the Canadian dollar
Below is the hourly chart of the Canadian dollar.
A trader at the beginning of the week thinks like this:
Below is a 1-hour chart of the USD/JPY currency pair.
Below is a 1-hour GBP/USD chart.
Finishing the consideration of examples, I would like to consider the situation for timeframe 15, where Pivot is taken not for the last week, but for the previous trading day. This example will show that the general approach is the same for all timeslots.
Here it is important to pay attention to one detail. During a breakout, the price rarely rolls over or consolidates, so on small timeframes, you need to enter the breakout more aggressively.
Finishing to consider the features of using Pivot points, it should be noted that they are taken into account by both all professional traders and large participants. Therefore, it is important to supplement your work with the use of these levels, which, unlike the usual resistance and support, are not built subjectively, but on the basis of clearly verified mathematical algorithms.
Good afternoon, dear traders! Today we will talk about Pivot Points - an indicator that experienced speculators use to find reversal points in a price chart. Although it is applicable to any type of market, nevertheless, it shows the best results on financial market Forex. Pivot's interest lies in the fact that it saves the player from having to independently determine the levels of support and resistance. The electronic version of the indicator in a matter of seconds will independently process the array of data and set the most important lines for each trader! The main thing is to understand the essence, and learn how to use it correctly!
Pivot Points is a veteran of technical analysis since the scientific platform was developed by a mathematician back in the first half of the 20th century! The creator of the reference point method is the American mathematician Henry Chase. This method came to the taste of the players who worked in the "exchange pit". Initially, Pivot Point was used when trading on stock markets. Over time, the foreign exchange market became available to the general public and the indicator was quite successfully used when trading currency pairs.
Interestingly, Pivot Points for traders of that time became something like a forecast that realizes itself. The fact is that the indicator was so popular that all speculators of the middle of the last century used it exclusively and made deals in accordance with it. The forecast worked because many players simultaneously opened trades in the same direction.
Pivot Point Technique: as easy as shelling pears!
The Pivot Point technique is easy to understand. For calculations, the values of the extreme points of the previous trading period, as well as the closing price, are used. Based on these data, the average value is determined. It is these points that are called reference points, growth points, or equilibrium points. On their basis, support and resistance levels are formed, and the central Pivot axis is built. Together, the points, lines, and axis make it possible to predict price movements.
To build the indicator, a minimum of calculations will be applied:
With such simple mathematical formulas, extremely effective indicator. Before the ubiquity of online trading, Pivot Point had to be calculated manually using a calculator, but this is not at all difficult to do. Now trading terminals perform all calculations automatically at midnight GMT.
Before considering the mechanism of trading by Pivot Point levels, let's discuss the periods. By default, each terminal forms support and resistance lines once a day based on the daily candle of the previous trading period, but at the same time, the indicator is used for intraday trading. Such a time difference is necessary for the correct display of the instrument. If the periods of the price chart and the indicator chart are the same, then it will be displayed as a dot instead of lines. If the timeframe of the indicator is less than the one on which it is used, then it will not be visible at all.
Traders who use Pivot Point on an ongoing basis recommend using the indicator not only with the daily timeframe, but also with the weekly, monthly and annual. If the levels built on different periods coincide, then this strengthens the data of the chart.
How to trade using Pivot Point: from words to deeds!
Many traders, underestimating the capabilities of the indicator, use it solely as a tool for quickly and accurately building support and resistance levels, but in this way a lot of useful data escapes. Similarly, it is often used by traders who have chosen a non-indicator trading system. For example, Price Action. Below we will try to explain as simply as possible how to trade with Pivot Points in order to get the most out of this simple and at the same time effective tool.
4 fundamental rules of Pivot Point trading.
Classical technical analysis by Pivot levels states that after the opening of the trading session, the price will move towards the nearest pivot point. Accordingly, you need to trade, predicting such a movement. Here are the basic rules for trading with Pivots Point:
For clarity, let's consider a chart of the euro-dollar price pair (H1 timeframe) for five days with the Pivots Point indicator applied.
The circles indicate the periods of price consolidation near the pivot points, and the arrows indicate the moments when the price finds support on one of the indicator lines. As you can see, Pivots Point gives very accurate signals.
Pivots Point for flat trading!
Every trader dreams that the market would constantly have a clearly defined uptrend or downtrend. After all, this allows you to seriously replenish the deposit. As practice shows, this dream is realized only by 30-40%. In the remaining 60%-70% of cases, a banal price consolidation can be observed on the market.
Many traders neglect this situation and try not to enter the market, waiting for the start of a strong trend, while losing serious amounts! To get the most out of a trading session, you need to find a decent flat trading strategy. Perhaps one of the simplest is Pivot Point trading.
First of all, we put the indicator on the chart of the currency pair. Next, we define the goals we want to achieve. In the picture below, the price fluctuates and approached the S1 level. We play on the rebound from support and resistance levels. However, it is better to choose not R1, but PP (central axis) as the goal, since it is easier to achieve.
We enter the market when the candle touches the S1 level. Stop loss is set to a level lower, that is, to S2. If our calculations are correct, then the price, having rebounded from S1, will begin to "reach" for PP, as shown in the chart below.
When the candles begin to approach the central axis, you can tighten the Stop Loss and set it slightly above S1. This will protect your deposit from loss due to a sharp change in the direction of the chart. The position is closed when the PP level is touched.
Pivots Point: how to trade on a breakout?
You have already understood that trading with the Pivot method is quite simple. Now let's emphasize one more advantage of this indicator - its versatility! It can be used both in consolidation and in a trend! Let's figure it out!
As we all understand, there are no eternal levels of support and resistance. Sooner or later, the price will break through one of them. Based on this, we can distinguish two trading strategies for a breakdown: aggressive and cautious. The name speaks for itself. In the first case, the position is opened in the direction of the price, as soon as it breaks through the central axis, preventing it from “feeling” the level. Naturally, such trading brings the most profitable deals, but also a high degree of risk.
Cautious trading implies that the trader will give time for the price to test a new level. After that, you can safely open a position in the direction of the breakdown. Such an expectation costs a few points of profit, but it significantly reduces the risks.
It is important to understand that the price will look for resistance and support levels, so focus on the next level after the broken one. That is, if the S1 level was broken from top to bottom, then the next support level, most likely, will be S2, and so on. If the breakdown occurred from the bottom up, then the stop loss must be set below the level that was left behind, if, on the contrary, from top to bottom, then we set it slightly above the broken level. Pending orders can also be placed based on previous Pivots Point levels. So if there was a breakdown of the central axis from the bottom up, then the stop loss is set at S1, if from top to bottom, then at P1.
Pivots Point: defining market sentiment!
As you might guess, the market has only two moods: bearish and bullish. The Pivots Point indicator makes it easy to determine it. For this we need only the central axis of the tool. If the chart has broken it from the bottom up, then this is a bullish mood. It is necessary to open deals to buy, as traders are set to rise in price. If the breakdown occurred from top to bottom, then the mood in the market is bearish. It is better to refrain from transactions or open short positions. That's all wisdom!
The Pivots Point method is extremely simple! Even a schoolboy will understand the algorithm for calculating and plotting a graph! However, the indicator is very accurate and versatile. Shows the best results when trading intraday! It is applicable for any type of exchange, but it is very popular among traders who work in the Forex market.
Pivot points, they are also classic pivot points. A popular automatic way to determine support and resistance. How to use them correctly and why are they needed at all?
Key support and resistance levels are what many traders base their decisions on. And this is not surprising: if, according to the trader, the support or resistance zone is strong enough, it is next to it that limit or stop orders are placed, which are used in the foreign exchange market. In other words, it is a zone of general interest.
These levels, like everything in technical analysis are quite subjective. They are painted in different ways and in different places. However, if we take levels that are built according to a strict formula, then we get lines that are not subject to diverse interpretations. They are always the way they are, because that is the formula. This is what pivot points are.
How to use them? Exactly the same as support and resistance zones. Trade breakouts and false breakouts, pay special attention to pullbacks from them after an unsuccessful breakout. We talked about all this in the previous lesson.
The easiest way to identify support and resistance zones has been used on Wall Street for decades. It is taken, corny, the maximum price, minimum, closing price for a certain period and divided by 3 - this is how the reversal point is obtained, it is also a “pivot” (pivot).
This pivot point is then used to calculate three levels of support and resistance, which is done using the following standard formula:
These zones are used as beacons - a price area that should be paid close attention to.
For example, the price approached R1, if there is no reversal, we are waiting for a reaction to R2, if not, to R3. As a result, we get the following picture, where the R3 level worked:
On the Investing website, you don’t even need a calculator, there are several types of ready-made pivot points right away (they are called pivot points there). On the side, you can select the appropriate interval (timeframe).
It remains to find these points on the chart and draw them with pens according to the current quote.
It makes sense to recall and draw them for the 1-day timeframe, hourly and 15-minute charts in order to fully understand the essence of the tools used. The larger the timeframe, the more significant the support or resistance pivot will naturally be.
On, presented here on the site, there is an automatic tool for constructing pivot points. Namely, there are two of them:
On the chart, they are selected like this:
As you can see, the chart is very generous and gives us 5 support zones and 5 resistance zones at once. At first, their number may seem overwhelming - why are there so many of them?
All the magic is hidden in the settings. We click on the icon in the form of a gear and adjust the points for ourselves.
Let's uncheck the box first. (show pivots on history) to get just the current pivot points.
Great - nothing superfluous, just lines for the current week.
Please note: the "P" line is the pivot point. The same pivot, from which the support and resistance zones are then calculated.
By default, pivot points are built automatically depending on the timeframe you choose. Namely:
It works like this. Let's say we have chosen a timeframe of 60 minutes on the chart. Pivot points for it are built at the beginning of a new week and do not change until the beginning of the next one. This happens if in the settings is selected Auto. However, in the same place you can change the period for which these points are built to any other.
If the data for the last week is used by default for the 1-hour timeframe, then in the settings you can select for the day, month or even year, as you wish.
At the beginning of this article, we gave the classic formula for calculating pivot points. She is far from the only one. Many researchers have created their own formulas to calculate support and resistance zones. And you can choose one of the following options:
The traditional and classic version are very similar. Only the method of counting points 4 and 5 differs. Woody and demark variants were developed, respectively, by traders with surnames (surprise), Woody and DeMark. Well, "camarilla" is the development of Nick Scott, a well-known bond trader.
All these options can be selected all in the same menu Pivot Point Standard:
Let's say we choose the DeMark option by unchecking the historical pivots. Not bad at all, the lateral range is immediately visible:
The second option available on the live chart is Pivot Points Hight Low. All it does is simply display the maximum and minimum price values for the time period specified in the settings.
This is a convenient option for determining the maximum / minimum price values, which are then used to build f / s zones and work them out.
What to do with them? The same as with support and resistance lines. Are you looking for:
After a confident breakout of P (baseline), the price likes to travel to the next support or resistance:
Pivot lines often form channels. Now we remember. After a false breakout, it is not uncommon for a strong movement in the opposite direction.
From the point of view of trading psychology, this is a classic. Unsuccessful breakout (entry into a new trend that did not happen) = disappointment, after which the other side takes the wheel. But after a real breakdown, the best option is not to enter immediately, but to wait for a rollback to support (s2 on the chart below), which became resistance:
In general, false breakouts are perfectly combined with pivot points. Again, notice how confident a reversal will be in the opposite direction if the breakout is false:
As we remember, the entry on a rollback after a real breakout of f/s is one of the most successful options:
And feel free to customize the display of pivot points for yourself. Change their color and thickness as you like. At the same time, you can turn off unnecessary ones if they interfere with you by unchecking the corresponding checkbox:
So, pivot points are just support and resistance, which are built automatically according to the formulas embedded in them. They are used exactly the same way. On the one hand, they remove the need to draw with pens - everything will be drawn for you. On the other hand, the formula remains a formula and therefore the pivots do not replace, but complement what is drawn with pens.
What to choose? Here, as with any mechanical indicators, it all depends on your practice and ability to interpret the results. It is also important how well you know how to confirm the data of pivot points with other tools.
It is often asked what pivot points were used by that taxi driver from the story I described in the Telegram channel, who “overclocked” $300 to $20,000 without having the slightest idea of technical analysis. Ordinary - classic pivots from investing. I will not tire of repeating that you should not be inspired by such stories, you can often achieve quick results on martingale and pivots, it’s just that martingale in any form is unprofitable in the long run. But, beginners love such examples, of course, because they dream of quick money.
I would try the classic, the traditional and the DeMark version as one of the smarter ones. But no one bothers you, of course, to try everything, analyze them in history and choose the option that suits you best.
We have already written that technical analysis is practically an integral part of trading. Only those who trade based on fundamental data can argue with this. However, many novice traders use the indicators that most brokers offer: Stochastic, Bollinger Bands, moving average, etc. They are effective, but sometimes you can improve your trading results with the help of other indicators. Pivot points are one of these - we will tell you how to use it right now.
Before we start using the indicator in trading, it would be nice to understand what it is, right? In technical analysis, Pivot Point is one of the main indicators for many traders, which shows trend reversal points with high accuracy.
The indicator system was developed over 80 years ago by Henry Chase. However, even now it has not lost its uniqueness.
What are these Pivot points, we will analyze in more detail, and also tell you about the strategy with which you can use the tool with the greatest efficiency. But first, let's figure out how the levels are calculated. The following formulas are used for this:
But what do these values mean? P – Pivot level, S – value of the support level, R – value of resistance levels, H – maximum price of the selected timeframe, L – minimum value of the selected timeframe. C is the closing price. All data are taken into account for a certain time period, on the basis of which the calculation is made.
So, what is this pivot point? This is the value of the asset price, which is exactly in the middle of the levels S1-R1, S2-R2, and so on. And you already know how to define it. But you don't have to use a calculator. There are also easier ways.
Don't know how to use Pivot Points? First you need to decide on how to define them. To do this, you can use a special indicator. But it is worth understanding that there are different methods for calculating levels: standard, Woody's Pivot Point, Kamaril, DeMark. To begin with, we recommend that you deal with the standard version, which is offered in the list of indicators of our live chart.
You can also learn how to calculate the Pivot Point for binary options on your own, but for this you need to gain experience and deal with the formulas that we left above. The Investing Portal has a program that automatically determines the Pivot Point. Another option is to use a special calculator. You enter the necessary data into it, and then the system itself displays the Pivot Point. The only thing left for a trader is to understand how to use the received data. We will help you with this now.
What is the Pivot point, we basically figured it out. Now the most difficult part remains - to understand how to use them in soybean trading on binary options. We will go the easy way. We will not build levels on our own, but trust in signals from the largest information portal for traders - Investing.com, which does not ask what Pivot points are, but simply gives signals.
So, go to the site investing.com (or immediately ru.investing.com), hover over the "Technical Analysis" section and click on "Pivot Points".
Let's take the EUR/USD pair as an example. The pivot point is at 1.1117. You also need to select an interval. For example, we choose 5 minutes, since we will conclude deals with this expiration. But in the future, you can experiment with timeframes and stop at a more suitable one.
Now look at the chart. If the price is below the Pivot point on the indicator, open a trade for 5 minutes to increase. If the price is higher, ignore the signal. As you can see, the Pivot Points indicator for binary options only gives up signals. You do not have to buy a put option with this strategy.
Now you know what is Pivotpoint and how to use it in binary options trading. It is not at all necessary to calculate the levels and the value of the point yourself, because now there are many other ways to do this, which greatly facilitate the work with the indicator. But you should not immediately use the strategy in real trading if you have not done it before. Try the method on a demo account, because there is no guarantee that this way of trading will suit you.