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Identify pivotal point and how to use pivot charts

A Pivotal point is used to determine support and resistance levels in technical analysis. Identifying support and resistance is an important step to help investors predict the correct trend and make appropriate order placement decisions. So how to use pivot point to determine support and resistance.‘s find out detailswith Forex Trading right now!

Pivotal point and basic information about pivot charts

Pivotal point in technical analysis is often used by investors to determine the level of directional movement. Besides, they are also used in conjunction with support and resistance levels on the chart. Based on the pivot point, investors can completely identify areas of price fluctuation. And then it is possible to find effective trading points.

Basic concepts What is a pivot point?

Pivot point or another name is pivot point. It is called a pivot point because this area on the price chart is likely to reverse. Pivot is the average of the highest price area along with the lowest price area.

Pivot point is an important indicator for investors when analyzing
The pivot point is an important indicator for investors when analyzing

To be able to determine support and resistance levels. Investors also need to consider and decide when the price will continue to follow the trend. To know this, investors can completely rely on the reversal technical indicator. These points are all important factors for investors to find points to place orders when trading forex. Pivot can be used as support and resistance levels. They can also be used by investors to identify turning points along with predicting price trends.

See more: Be more successful through this technical analysis

Meaning of Pivotal point in forex

When trading forex, the pivotal point can be thought of like an average price point. They are purely used to make buying and selling decisions. At the same time, it is also used as a tool to determine support and resistance levels. Currently, investors must consider support and resistance levels when making adjustment decisions. Next is the market trend, in this case, the important buying point must be considered the point to determine the trend. next in the market.

Support and resistance points in the pivot point

In the forex market, “bid” is often used to refer to the amount of an asset being purchased. The balance of supply and demand is the reason asset prices fluctuate continuously. If demand prevails, prices will tend to increase and vice versa. 

Support and resistance points in the pivot point
Support and resistance points in the pivot point

As in the example above, whenever the price touches the green support level, the low price will attract “demand” and strong participation in the market. While the “supply side” is no longer paid too much attention. 

The most accurate structure and calculation of Pivotal points.

To proficiently apply pivotal point to technical analysis, investors need to clearly understand the point’s structure. Traders can completely learn Forex technical analysis and will learn the structure of Pivotal point themselves .

The most accurate structure and calculation of pivotal points
The most accurate structure and calculation of pivotal points

How to determine the structure of the pivot point?

Pivotal point includes three main components: main line PP, support levels and resistance levels. The PP main line includes the pivot point along with the main trunk line. Support levels are support pivot points including S1, S2 and S3 located below the pivot line. Resistance levels are resistance pivot points including R1, R2 as well as R3 located above the pivot line.

The key formula in forex

The pivot point is calculated using the following formula: Pivot = (high price + low price + closing price)/3

Besides calculating pivots, investors can also calculate different support and resistance levels. With support levels there are three levels including S1, S2 and S3. S1 = 2 x pivot point – high price of the previous period. S2 = pivot point – R1 – S1. S3 = pivot point – R2 – S2.

With resistance there are three levels including R1, R2 and R3. R1 = 2 x pivot point – low price of the previous period. R2 = pivot point – S1 + R1. R3 = pivot point – S2 – R2.

Apply pivot point strategy when trading forex

After calculating the formula Pivotal point , we have determined the resistance and support levels. Therefore, the essence of pivot point trading is to trade according to support and resistance levels. Currently, investors just need to apply the appropriate trading method for each situation.

Use a combination of pivot chart and reversal candlestick pattern

Prices tend to reverse at resistance and support zones created by PP. A reversal is more likely to occur if confirmed by a candlestick reversal pattern. At this time, the investor makes a transaction like a strategy when the price touches the support and resistance level.

Use a combination of pivot chart and reversal candlestick pattern
Use a combination of pivot chart and reversal candlestick pattern

If at this time the price is within the support and resistance threshold, the entry point will be the closing price of the candle. For sell orders, the stop loss position will be above the resistance line. For buy orders, the stop loss will be below the support line.  Take profit at resistance levels R1, R2, R3 with a buy order. And take profit with sell orders at support levels S1, S2, S3.

Apply a pivot chart when there is a breakout point

When the price breaks the support zone Pivotal point, the resistance will tend to increase or decrease sharply. Investors can place orders as follows. Place a buy order when the price breaks through the resistance levels R1, R2, R3 and increases. Or place a sell order when the price breaks through the support levels S1, S2, S3 and falls.

Apply pivot chart when there is a breakout point
Apply pivot chart when there is a breakout point

The point at which the candlestick is broken or retraced will be used to test the broken resistance level after the price breaks out. By placing this order, investors can completely close the gap. But at the same time, you will also lose your opportunity if the price does not turn around and goes straight.  

See more: Discover Exness – The world’s leading Broker

Apply strategy when there Pivotal point is the central point

Based on the price position relative to the PP line, investors can determine the advantage of the buyer or seller when planning a transaction. If the price crosses the PP line, the buyer now has a position in the market and the investor places a buy order.

Apply strategy when a pivotal point is the central point
Apply strategy when a pivotal point is the central point

If the price crosses the PP line and falls, it means sellers have an advantage in the market. At this time, investors can consider placing a sell order. Placing orders made at the moment of the candle will confirm the trend after the breakout. For short orders, the stop loss is above the PP line. For buy orders, the stop loss is below the PP line. Take profits at the next support and resistance zone depending on your buy or sell order.

Conclude

Pivotal point is an important technical analysis tool widely used in forex trading and financial markets. Pivot points as well as support and resistance levels. They can provide important information about market conditions. And help investors help form trading strategies. What are you waiting for? Join Forex Trading to find out the details right now.

FAQs

How are support level S1 and resistance level R1 represented?

Support level S1 along with resistance level R1 are both represented by the red line.

How are support level S2 and resistance level R2 represented?

Support level S1 along with resistance level R1 are both represented by the green line.

Can the application’s Pivotal point be combined with the MACD indicator?

This is a method that is also favored by many investors. Investors can completely combine and use in technical analysis.

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