Flash point indicator - Flashpoint indicator - How To Trade Pivot Points To Improve Your Forex Trading

How To Trade Pivot Points To Improve Your Forex Trading

by forexrobot on September 30, 2010

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Pivot point trading is an effective Forex trading tool that be applied by traders as part of their technical analysis. Pivot points were first used by floor traders as a way that the could calculate the anticipated daily direction of the markets.

Learning Pivot point trading provides you with an effective trading approach which can be combined with other technical approaches to help your Forex trading profit.

The use of pivot points as trading strategy was originally started by floor traders in the futures markets. This gave trades a way of quickly and easily computing where the market was most likely to head over the coming day.

Pivot point trading centres around the Pivot Point and a calculated series of pivot levels. These are set levels in the market where it is considered likely that the market may pullback or stall.

Pivot points are mathematically calculated. They use the high, low and close prices, within the pivot formula to calculate a series of pivot Forex trading levels. These pivot point levels can then be overlayed on the current market price.You can calculate the levels by inputting the high, low and close prices into a pivot point calcualator.

Most commonly seven pivot levels are used in this trading approach. Above the current market price three levels are given which are seen as resistance levels to price action. Three levels given are below the pivot point and are regarded as levels of support. The final level to note is the pivot point level itself. This is seen as the most important pivot level. If the market opens above this level for the day the market is considered bullish. If the market opens below this level then traders will consider it to be bearish for the day.

The use of pivot points in trading is a widely popular approach used by many currency traders. This is because pivot levels are considered to be leading rather than lagging indicators. Pivot point levels are indicative of the likely directino of markets in upcoming sessions. This makes pivot points a leading indicator as opposed most technical indicators which are seen as lagging the market.
As a consequence of the number of traders who follow pivot point trading, it is likely that markets will react around these points.

Pivot point Pivot points lend themselves to a wide range of trading approaches. Pivot levels can be used to trade both range and breakout strategies as they are flexible enough to identify both potential breakout and reversal levels. They are also useful for short time frame traders who focus on small quick trades in the market.

As will any technical approach the the markets, pivot point trading is not 100% accurate . However pivot points are a useful tool in helping to balance the trading odds more in your favour.

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