How to Use Pivots Points for Day Trading - Trend Indicators

How to use Pivot Points indicator in day trading forex - learn how to analyze Pivot Points Levels and how to trade Pivot Points Reversal signals explained.

Pivot Points are used by traders to find support and resistance levels based on the previous day's price action.

This Pivot Points indicator is a very useful tool that use the previous bars' highs, lows and closings to project support & resistance levels for future bars.

Pivot Points indicator provides an idea of where key support and resistance should be. Place the pivot points on your currency charts and price will bounce off one of these levels. These levels are used by investors to determine market tops, market bottoms or trend reversals.

• Daily pivots points are calculated from previous day's high, low, close which ends at 5.00pm EST(2100 GMT)

This indicator is shown below

Analysis in FX Trading

The central pivot itself is the primary level, which is used to determine the trend

The other support & resistance levels are also important in calculating areas that can generate significant market movements.

This indicator can be used in 2 ways

The first way is for determining overall trend: if the pivot point is broken in an upward movement, then the market is bullish, and vice versa. However, pivot levels are short-term trend indicators, useful for only one day until they need to be recalculated.

The second method is to use these points to enter and exit the markets. This indicator is a useful tool that can be used to calculate the areas that are likely to cause price movement.

These points should be used conjunction with other forms of technical analysis such as Moving averages, MACD and stochastic oscillator.

This indicator can be used in many different ways. Here are a few of the most commonly methods for utilizing them.

Trend Direction: Combined with other technical analysis techniquesmethods such as overbought/oversold oscillators, volatility measurements, the central point may be useful in determining the general trending direction of the currency exchange market. Trades are only taken in direction of the trend. Buy signal occurs only when the market is above the central pivot point and sell signal occur only when the market is below the central pivot points.

Trading Price Breakouts: A bullish signal occurs when the market breaks up through the central pivot point or one of the resistances (typically Resistance Level 1). A bearish signal occurs when the market breaks down through the central point point or one of the supports (typically Support Zone 1).

Trend Reversals:

• A buy signal forms when market price moves toward a support level, gets very near to this point, touches this point, or moves only slightly through this point, & then reverses and moves back in the opposite direction.

• A sell signal forms when market price moves toward a resistance level, gets very near to this point, touches this point, or moves only slightly through this point, & then reverses & moves back in the opposite direction.

Stop loss and/or Limit Profit Values Determined by Support/Resistance: This indicator may be potentially helpful in determining suitable stoploss &/or limit profit placements. For examples, if trading a long break out above the Resistance 1 it might be reasonable to position a stoploss.

Combining with Moving Average Cross-over System

A good indicator to combine and trade reversal signals is the MA cross over which can be used to confirm the direction of a reversal signal.

An investor can then open an order once these 2 indicators give a trading signal in the same direction.

MA Crossover Technique

Moving average crossover method that can be combined with this indicator to come up with a trading system for generating buy & sell signals.

To download this Pivot points Indicator:

https://c.mql5.com/21/9/pro4x_pivot_lines.mq4

Once you download the indicator. open it with the MQL4 Language Meta-Editor, Then Compile the indicator by pressing the Compile Button & it will be added to your MT4.

NB: Once you add the indicator to your Meta Trader 4 Software, the technical indicator has extra lines referred to as Mid Points, to remove the extra lines open MQL4 Meta Editor(short-cut key board key - press F4), & change line 16 from:

Extern bool midpivot = true:

To

Extern bool midpivot = false:

Then Press Compile again, and the indicator will then appear as exactly portrayed on this web site.