Pivot Points Forex Trading Technical Analysis & Pivot Points Signals
This indicator consists of a central pivot which is surrounded by 3 resistance levels above and 3 support levels below.
Initially these points were used by floor traders to analyze & trade the equities & futures exchange markets. This technical indicator is considered to be leading rather than lagging.
Pivots provide a quick way for forex traders to analyze the general trend of how the market is going to be moving during the course of the day. A few simple calculations are used to plot the resistance and support levels.
To calculate these points for the coming trading day is the previous day's
- high,
- low, and
- close prices are used
The Forex trading day closes at 5:00PM EST this daily market closing time is when the technical indicator is updated.
The 24-hour cycle for this indicator are calculated using a complex formula. The central pivot is then used to calculate the support & resistance areas as follows:
Resistance 3
Resistance 2
Resistance 1
Pivot Point
Support 1
Support 2
Support 3
Forex Trading Analysis and Generating Signals
This indicator can be used in different ways to generate forex signals. The following methods are the most common technical analysis:
Trend Identification Signals
The central pivot is used by traders to determine the general market trend direction. The trades taken will only be in the direction of the market trend.
- Buy signal - price is above the central point
- Sell signal - price is below the central point
Price Breakout Signals
Price breakout signals are generated as follows
- Buy signal - is generated when price breaks-out upward through the central point.
- Sell signal - is generated when price breaks out downward through the central point.
Price Breakout
Price Reversal Signal
Price reversals are generated as follows
Buy Trading Signal- when price moves downward toward one of the support level, then touches support or moves slightly through it then quickly reverses & moves upward.
Sell Signal- when price moves upward toward one of the resistance area, then touches resistance or moves slightly through it then quickly reverses & moves downward.
Price Reversal Signal
Setting Stoploss & Limit Profit Values
The central pivot & the other support & resistance zones are used by traders to determine suitable stop loss & limit profit levels.
Setting Stoploss & Limit Profit
If a buy is placed above the central point the Resistance 1 or Resistance 2 can be used to set the take profit level, and the Support 1 can be set as a Stop-Loss Level for the trade.
To download Pivot points:
https://c.mql5.com/21/9/pro4x_pivot_lines.mq4
Once you download it open it with MQL4 Language Meta Editor, Then Compile the technical indicator by pressing Compile Button and it'll be added to your MetaTrader 4.
Note: Once you add it to your MT4, the indicator has additional lines named Mid Points, to remove these additional lines open the MQL4 Language Meta Editor(shortcut keyboard key - press F4), and change line 16 from:
Extern bool midpivots = true:
To
Extern bool midpivots = false:
Then Press Compile again, & it'll then appear as exactly shown on this web site.
