There are a lot of traders who use forex charts when they trade on the forex market. There are a number of ways that you can use forex charts to trade and one of the indicators that you should know about are the pivot points. Pivot points are used in conjunction with support and resistance levels. It is important that you know what pivot points are, how they are calculated and how you can use them in trading.
What are Forex Charts Pivot Points?
Pivot points are the areas in support and resistance levels where the currency pair price can change. To use pivot points you will have to sue the support and resistance levels. The pivot point will not only tell you when a change in the price movement should occur, but also the overall trend of the market. This information is vital to anyone looking at using trends in their trading.
Calculating Pivot Points
There are a number of ways that pivot points can be calculated. The most common system for these calculations is the 5 point system. There are 5 pieces of information that you need to know about when you look at this calculation. They are the daily high, low and close as well as two support and resistance levels.
This information will then be included in a number of equations that will help you determine where the pivot points are. There are many other more complex methods of calculation that can be used for the pivot points. However, the 5 point system is the simplest and the easiest for retail traders to use.
The Use of Pivot Points
Once you know how to calculate the pivot points you need to know how to use them in trading. When you calculate pivot points you should consider that the pivot point is actually the primary support and resistance point. This is true based on the fact that the pivot point is the largest price movement that is expected for the currency pair within a range.
There are two common ways that pivot points are used. The first is to determine what the overall trend of the market is and the second is for entry and exiting the market. When you use the pivot point for the first reason you are going to look at the market is terms of bulls and bears. If the pivot point price is broker by an uptrend then the market is bullish. Of course, when you use pivot points for this purpose you need to consider that they are short-term indicators.
When you use the pivot point to enter and exit the market you have to know what you are doing. The best way to use the pivot points in this manner is to combine them with limit orders. When you do this you can set a trade for if the price breaks your pivot point.
Pivot points are a very useful tool to have when you are trading. There are a number of ways that they can be calculated and you need to find the calculation that you are comfortable with. You should also consider the two ways that you can trade with these points.